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Equity Rally, Fiscal Optimism Prompts USDBRL Slide Back Below 5.00

BRAZIL
  • BRL was one of the best performing global currencies on Thursday, gaining around 1.3%. The biggest S&P rally since January, thanks to solid earnings from technology firms, underpinned the renewed optimism which saw USDBRL slide back below the pivotal 5.00 mark.
  • The decision to limit the deduction of tax benefits on state tax ICMS was welcomed by finance minister Haddad and may have also garnered some fiscal optimism. This, combined with some firmer job creation data both acted as additional tailwinds for the Real.
  • Furthermore, BCB Governor Campos Neto maintained his hawkish posture, reaffirming at the Senate Thursday that core inflation remains high, and that annual inflation is set to drop until the middle of the year and then reaccelerate.

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