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Goldman Sachs Say Copom, CMN Meeting In Spotlight For BRL

  • Over the last couple of weeks, BRL underperformed other high-carry EM currencies, likely because of its higher beta to Chinese growth developments relative to peers. And, as the Chinese assets have bounced on the margin, (especially on Friday), BRL has also recovered together with other China-sensitive EM FX and was among the best-performing currencies.
  • Given its higher gearing towards Chinese demand, the news flow out of China is likely to continue to be a key differentiator of the Real’s relative performance within the EM FX Carry space.
  • However, as we move towards the second half of June, local news is likely to be back in the spotlight with the June COPOM meeting (the last one before August when GS economists believe the BCB may signal, or even initiate, rate cuts) and the CMN meeting to set the 2026 inflation target. If inflation expectations do not rise significantly on the back of a potential target change and the COPOM continues to communicate its focus on the disinflation process, then the Real should remain supported.
  • At the same time, after a much stronger Q1 GDP print, GS economists expect activity to benefit from renewed fiscal stimulus and the favorable outlook for agricultural food prices. This, coupled with continued fixed income inflows as the BCB begins cutting rates remain important tailwinds for the Real.

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