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USDBRL Breaks Support, Daily Covid Cases Rise Above 200,000

BRAZIL
  • A clear break of 5.5184 in USDBRL has opened up potential for a move to 5.3885, Nov 11 low, which also coincides with the 200-day moving average.
  • Leftist ex-President Luiz Inacio Lula da Silva, the front-runner in the polls for the 2022 election, said he would like to have former Sao Paulo Governor Geraldo Alckmin as his running mate. The move is considered a slight move towards the centre, providing an additional tailwind to the soaring BRL.
  • Newswires are expecting the renewed optimism for the local currency to face short-term obstacles as the nation reported a record number of daily Covid-19 infections in 24 hours, with 204,854 new cases on Wednesday. Overnight, CNN Brazil reported the economy ministry is studying revising GDP projection downwards due to omicron.
  • Additionally, political tensions surrounding public sector wage hikes and associated strikes may weigh on the BRL recovery. UOL Brasil reported Bolsonaro saying there is a possibility of readjusting public servants wages next year.
    • Separately, UOL also reported that Bolsonaro says he will present a bill to reduce fuel prices when Congress returns.
  • *National Treasury will offer fixed-rate bonds maturing in 2023, 2024, 2025, 2029 and 2033 one day after the swap curve fell more than 20bps; the size of the offer will be watched as officials can adjust volumes in periods of enhanced volatility.

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