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Rabobank analysts suggest that for the Brazilian economy, it was a week marked by the release of the last batch of 3Q activity data but even the positive numbers were incapable of shielding Brazilian assets from the sell-off in Latam markets.

Key Quotes

“Triggered by the political turmoil in the region, the bad mood was wide-spread: 5 out of the 6 worst performing currencies in the week are from Latam countries and our Latam FX aggregate index points to a 2.4% loss in the same period.”

“On this backdrop, the BRL extended the downward trend and is now trading close to its year-highs (4.20 per USD) again.”

“Back to fundamentals, the IBC-Br – broad activity index calculated by the BCB – came in at +0.4% m/m in September, equivalent to a 2.1% annual variation. On a quarterly basis, the BCB data points to a robust activity expansion of 0.9% q/q in 19Q3.”

“Moreover, retail sales and service revenues accelerated in September, with the former posting a gain of 0.9% m/m and the latter increasing by 1.2% m/m. The quarterly clips correspond to 1.4% and 0.8% q/q in 19Q3, respectively.”

“All in all, activity data still indicates a gradual economic recovery in the quarter, with particular contribution from retail sales, for which we expect an additional boost in 19Q4 provided by the release of FGTS funds. Thus, we revised our number for the GDP growth to 0.4% q/q (from: 0.2% q/q) in 19Q3 and to 0.9% (from: 0.7%) this year.”