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DI Swaps Curve Shifts Higher, USDBRL Little Changed

BRAZIL
  • Brazilian swap rates have moved higher following the latest mid-month inflation data. The above-consensus surprise bolsters the case that the BCB will stick with their current guidance that sees a continuation of the 50bp easing pace in coming meetings. While analysts have noted that the surprise was very much about volatile items, more concerning will be that recent services disinflation may be losing momentum.
  • The data also dampens the possibility that the BCB might accelerate the easing pace in the first half of 2024, spurring around a 10bp shift higher in Jan 2026 DI and further throughout the curve. Despite a small move lower for USDBRL at the open, the pair since pared those losses and remains in a tight 4.82-85 range on the session.
  • Overall, USDBRL bears remain in the driver's seat and recent price action has confirmed an extension of the current bear cycle. The move lower signals scope for an extension towards the 4.8000 handle and 4.6964 further out, the Jul 28 low. Key short-term resistance has been defined at 4.9771, the Dec 13 high.
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