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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
BRAZIL
- Last year, we saw that despite the aggressive tightening cycle run by the CBB, the BRL was down 6.7% against the US Dollar as the Covid uncertainty combined with political instability had been weighing on the real.
- As a result, Brazil risky assets also performed poorly in H2 2021, with Ibovespa falling by nearly 25% from peak to trough.
- Therefore, a potential ST consolidation in the US Dollar (i.e. BRL strength) could lead to a sharp rebound in domestic equities.
- Brazilian equities have now the lowest PE ratio among the EM world, currently standing at 6.13 for the MSCI MXBR Index - even below Turkey with a PE ratio of 8.
- The chart below shows the presence of a strong ‘Pavlovian relationship’ between Brazilian Equities and USDBRL exchange range; periods of BRL weakness have been associated with falling equities and vice versa.
- USDBRL rejected its 5.50 support yesterday, which corresponds to the 100DMA; a break below that level would open the door for a move down to 5.3840 (200DMA).
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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