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Analysts at Rabobank note that Brazilian assets had a mixed performance in a volatile week both external and domestically.

Key Quotes

“Country risk (5-year CDS) rose a bit further (+4bps to 241bps), as EM credit spreads widened. Local rates rallied in front end, belly (c. 20bps); Ibovespa stock index edged down (0.4%).”

“The BRL stood among the underperformers among 35 of the major currencies, losing 1.4% to 3.91/USD (EM, Commodity FX down 0.2-0.4% for the week). Political concerns are back, as the presidential campaign has started with a still unclear outcome seen from now. That keeps a perception of high uncertainty about the execution of key economic reforms in 2019.”

“Economic data out recently reaffirmed the fading effects of the truckers’ strike in real activity. Yet we not only look for a weak Q2 GDP, but also see downside risks for the pickup we have pencilled in for 18H2. Odds skewed to downside for our 2018 GDP forecast (+1.3% currently).”

“The week’s thin macro calendar highlights August IPCA-15 inflation preview (Thu.). We project a 0.10% m/m gain, taking the annual reading down to 4.3 y/y (from 4.5% y/y in July).”

“In politics, local markets will focus on a number of electoral surveys out in coming days, such as Ibope (due from Monday onwards) and Datafolha (due from Wednesday onwards).”