USD/BRL has come off sharply from its early August spike to 5.80. The broad turn lower in the US Dollar (USD) and the global equity market recovery are helping, ING’s FX strategist Chris Turner notes.
USD/BRL set to struggle to break through the 5.40/45 area.
“The commodity story is a worry for the Brazilian real. Brazil's terms of trade have dropped to the lowest levels since January 2023 as weak Chinese demand weighs on both soybeans and iron ore – two of Brazil's key exports. Brazil's terms of trade levels are more consistent with USD/BRL trading at 5.70/5.80.”
“In addition, investors await the Brazilian government's 2025 budget plans – which are announced on 31 August. The market view is split here. If the Lula administration prioritizes social spending, then fiscal targets will be missed and the real will be hit hard.”
“However, some in the market suspect that the government will cut spending to try and keep the bond market on side. Typically, fiscal weakness has always been the Achilles heel of Brazilian asset markets. Given this late August event risk with the budget and the terms of trade drop, we suspect USD/BRL will struggle to break support in the 5.40/45 area.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays in positive territory near 1.1000, looks to post weekly gains
EUR/USD trades modestly higher on the day at around 1.1000 in the American session on Friday. Although the cautious market stance limits the upside, the pair remains on track to post its highest weekly close of 2024.
GBP/USD climbs to multi-week highs above 1.2900
GBP/USD trades at its highest level in three weeks at around 1.2900 in the American session on Friday. The bearish opening seen in Wall Street points to a negative tilt in risk mood and makes it difficult for the pair to gather further bullish momentum.
Gold retreats after setting a new record high of $2,500
Gold stages a technical correction and trades below $2,490 after setting a new record high of $2,500 earlier in the day, boosted by falling US Treasury bond yields. Profit-taking could ramp up the volatility heading into the weekend.
Dogecoin price is set for a downturn as it encounters its resistance barrier
Dogecoin price is testing the resistance around the 100-day EMA at $0.1073, with an impending decline ahead. On-chain data shows DOGE's daily active addresses decreasing and dormant wallets moving again, signaling a bearish move.
Easing inflation worries despite robust sales data
The market mood got a further boost yesterday after the latest data release from he US hinted that the economy is not doing that bad, after all.