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The USD/BRL will likely trade around 3.90 during the first half of next year according to analysts at CIBC. They don’t see resurfaced political turmoil in Brazil.  

Key Quotes:  

“Bolsonaro’s departure from the PSL party and Lula’s release from prison spooked market participants last week, seeing USD/BRL hover around 4.2 and further appreciate on the back of global trade concerns. Despite the aforementioned political noise, the congressional agenda remains intact, with leaders continuing to push for administrative and tax reform proposals through congress. We don’t expect the resurfaced political turmoil to derail plans for reform, trade opening and privatization agendas.”

“We look for BRL upside, driven by potential USD inflows (amounting to BRL200-300 bln) from the TOR (transfer of rights) auctions, and the privatization of Electrobras. Moreover, the BCB has now signalled a pause for its December meeting, following an additional rate cut of 50 bps, which should provide another tailwind to the BRL into 2020. We maintain our downward USD/BRL bias towards the 3.9 mark.”