Flow Driven Price Action With Domestic Themes on Back Burner

The Interest Rate Curve found relief yesterday after the release of Price Index (IGP-M Act: 0.96% m/m | Exp: 1.23%) for December and the DI curve bull flattened. Swap rates fell 4-8bps across the belly and 12-18bps for longer tenors. Brazil swap rates are free from critical political news until February, when congress reopens, which might leave the curve more prone to the positive sentiment abroad.

USDBRL, despite a volatile week resides at pre-holiday levels of 5.20 as we approach year-end. Potential technical adjustments set to occur with players removing an estimated $5 to $6 billion dollars in overhedge position. Price action should be driven by this flow driven volatility before domestic data/themes come back into focus in the new year.

Covid-19 vaccine developed by Oxford University and Astrazeneca got clearance from U.K. health authorities; the vaccine is the main bet of Brazil federal government as it will be produced locally by the Fiocruz institute.