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USDBRL Closes Just Above Initial Support

BRAZIL
  • Broad greenback weakness and equity strength in the aftermath of the US data on Tuesday prompted some outperformance for the Brazilian Real. USDBRL closed just above initial support at 4.8416, the Aug 10 low. As mentioned, a break below here would threaten the most recent bullish theme and expose key support at 4.6964, the Jul 28 low.
  • Iron ore is leading gains among main commodity futures, up 2% in Singapore, paving the way for benign sentiment in the local stock market.
  • On Tuesday, we also noted that FT reports stated that President Lula is close to sealing an unlikely alliance with two right-wing parties formerly allied to Bolsonaro, in a move aimed at strengthening the hand of his administration. The deal would cede cabinet posts and potentially other roles in return for support in Congress, where the coalition led by Lula’s Workers’ party does not command a majority.
  • Additionally, this morning a gauge of inflation also printed below expectations: Brazil’s August IGP-M Inflation Index -0.14% M/m; Est. 0.03% (BBG)

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