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IGPM Inflation Also Surprises To The Downside

BRAZIL
  • On Wednesday, Brazil reported lower than expected IPCA inflation. Diverging from higher US yields, the Brazilian DI swaps curve shifted lower following the data. The prints potentially bolster the most recent rhetoric from the BCB regarding potentially ending the current tightening cycle at next week’s meeting.
  • USDBRL briefly broke back above the 5.00 mark following the data and amid broad dollar strength, however firmer equity benchmarks weighed on the pair throughout the latter half of Wednesday trade.
  • This morning has seen a similar dynamic with the release of IGPM inflation figures. This measure of inflation is used to correct electric power supply contracts, to index some government-regulated prices and also as a financial market indexing factor. This may continue to provide relief for the DI curve.
    • BRAZIL APRIL IGP-M INFLATION RISES 1.41% M/m; EST. +1.70% (BBG)
    • BRAZIL APRIL IGP-M INFLATION RISES 14.66% Y/y; EST. +14.98% (BBG)
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