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BRAZIL: President Lula Focuses On Economic Measures Amid Decline In Popularity

BRAZIL
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  • After the recent fall in his approval rating to a record low, President Lula is said to be keen to focus on economic measures already on his radar to reverse the slump in his popularity. O Globo reports that Lula is said to be seeking approval of the income tax exemption, launch of a cooking gas voucher and a review of loans guaranteed by private sector payrolls. Finance Minister Haddad aims to send the tax exemption to Congress by month-end, according to Bloomberg.
    • Following yesterday’s disappointing December economic activity data, DI swap rates are rallying further today, with yields down by another 8-10bp around the 2Y segment as the market continues to pare Selic rate hike expectations. Analysts continue to see a 15.0% year-end Selic rate, according to the BCB Focus survey, with the hiking pace likely slowing after another 100bp move next month, as the BCB continues to guide for.
    • USDBRL is also trading lower today, amid gains in iron ore prices, with the pair down 0.6% at 5.68. The move brings USDBRL to a new YTD low, narrowing the gap to support at 5.6340, the Nov 7 low.
    • With attention on potential economic measures, the domestic data calendar for the rest of this week is relatively light. IPCA-15 inflation for H1 Feb is the next key release, on Feb 25.
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  • After the recent fall in his approval rating to a record low, President Lula is said to be keen to focus on economic measures already on his radar to reverse the slump in his popularity. O Globo reports that Lula is said to be seeking approval of the income tax exemption, launch of a cooking gas voucher and a review of loans guaranteed by private sector payrolls. Finance Minister Haddad aims to send the tax exemption to Congress by month-end, according to Bloomberg.
    • Following yesterday’s disappointing December economic activity data, DI swap rates are rallying further today, with yields down by another 8-10bp around the 2Y segment as the market continues to pare Selic rate hike expectations. Analysts continue to see a 15.0% year-end Selic rate, according to the BCB Focus survey, with the hiking pace likely slowing after another 100bp move next month, as the BCB continues to guide for.
    • USDBRL is also trading lower today, amid gains in iron ore prices, with the pair down 0.6% at 5.68. The move brings USDBRL to a new YTD low, narrowing the gap to support at 5.6340, the Nov 7 low.
    • With attention on potential economic measures, the domestic data calendar for the rest of this week is relatively light. IPCA-15 inflation for H1 Feb is the next key release, on Feb 25.