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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
BRAZIL
- The Brazilian Real had an impressive rally from late July that saw USDBRL trade from 5.50 down to 5.01 lows on Monday. The move has coincided with the gap between Lula and Bolsonaro in the polls narrowing and perhaps more importantly a strong reversal in IPCA inflation from levels above 12% to the most recent mid-month print of 9.60%, released last week.
- With the Selic rate in restrictive territory at 13.75% and commentary from the central bank hinting at higher rates for longer, the BRL’s attractiveness from a carry perspective remains heightened.
- The rally has been in the face of a rising dollar, with the Dollar Index making fresh cycle highs earlier this week.
- However, the pair has reversed aggressively over the past two sessions and USDBRL has seen a near 4% bounce back to levels just shy of 5.20. Interestingly some desks have attributed the BRL weakness to potential dividend outflows and an overvalued currency in the short-term with an additional dynamic of today’s month-end PTAX potentially adding to the volatility.
- Exacerbating the USDBRL strength has no doubt been an extension of weakness seen across equity markets, combining with the sharp fall in crude futures seen since Tuesday.
- From a technical standpoint, the psychological 5.00 mark continues to act as a strong pivot and will have acted as an additional obstacle for further short-term weakness. Short-term focus is on initial key resistance at 5.2195, Aug 19 high. A break would signal a possible base.
- Tomorrow we will see second quarter GDP figures where the annual reading is expected to show a robust expansion to 2.8% y/y.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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