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According to analysts at Rabobank, Brazilian assets traded relatively in line with peers in recent days (equities being the only notable exception).

Key Quotes

“The BRL stood roughly flat from last week, trading just above 3.75/USD, despite the rally in Brazil CDS.”

“Local markets continue to watch government efforts to negotiate with Congress its proposal for the pension system reform. The government is now signalling the possibility to recalibrate some parameters (e.g. minimum age of retirement for women) to make it more palatable for politicians.”

“The pace of recovery in economic activity continues to disappoint. This week’s GDP data showed a weaker than expected growth in Q4, prompting us to revise down again our forecast for 2019 (now: 1.8%; previous: 2.2%). January employment figures also surprised on the downside and, in recent months, joblessness has moved slightly higher, job creation has slowed and real income has remained stagnated. That picture increases the risks of a cooling job market, which would mean another downside risk for consumer spending and GDP growth in 2019.”

“Late approval of the pension reform (possibly in early Q4) is already expected to soften the investment pickup this year. All in all, we sense that the risks towards our (newly revised) GDP forecast remains skewed to the downside.”