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BRAZIL: USDBRL Rises as Inflation Forecasts Continue to Deteriorate

BRAZIL
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  • Despite the broader greenback weakness on Monday, reflective of lower US yields, USDBRL is rising once again and has edged back above 6.20 at the open, briefly printing a high at 6.22.
  • The final BCB Focus survey of the year continues to show a deterioration of the inflation outlook, with economists now expecting IPCA inflation to reach 4.96% at the end of 2025. Furthermore, increases to the 2026 and 2027 inflation forecasts, to 4.01% and 3.83% respectively, continue to provide evidence of longer-term expectations remaining deanchored.
  • Efforts to thwart the rapid depreciation of the Brazilian real have continued, with the central bank auctioning a further $3billion in the spot market on December 26. Despite this action and the hawkish rhetoric from the Copom in recent weeks, USDBRL is up an impressive 27.5% on the year as heightened fiscal concerns persist, continuing to erode investor sentiment.
  • December IPCA inflation readings are scheduled on January 10.
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  • Despite the broader greenback weakness on Monday, reflective of lower US yields, USDBRL is rising once again and has edged back above 6.20 at the open, briefly printing a high at 6.22.
  • The final BCB Focus survey of the year continues to show a deterioration of the inflation outlook, with economists now expecting IPCA inflation to reach 4.96% at the end of 2025. Furthermore, increases to the 2026 and 2027 inflation forecasts, to 4.01% and 3.83% respectively, continue to provide evidence of longer-term expectations remaining deanchored.
  • Efforts to thwart the rapid depreciation of the Brazilian real have continued, with the central bank auctioning a further $3billion in the spot market on December 26. Despite this action and the hawkish rhetoric from the Copom in recent weeks, USDBRL is up an impressive 27.5% on the year as heightened fiscal concerns persist, continuing to erode investor sentiment.
  • December IPCA inflation readings are scheduled on January 10.