USD/BRL could turn faster than expected – Commerzbank
Economists at Commerzbank expect the USD/BRL to move back higher amid Brazil's political issues.
BCB's hawkish stance remains under fire
“The BCB's hawkish stance is already fully priced into the USD/BRL exchange rate, which is why we see little further appreciation potential for the BRL. Rather, we are concerned that the FX market risks underestimating the consequences of increased government influence on monetary policy.”
“The BCB will find it increasingly difficult to provide a credible counterweight to a presumably more expansionary government, especially when BCB president Roberto Campos Neto's term ends at the end of 2024. This could affect the BCB's credibility in terms of sustainable inflation control, which is the main argument for our forecast of higher USD/BRL prices next year.”
“At present, the BRL is still benefiting from the still attractive real interest rate outlook, but we see increasing risks that the USD/BRL could turn faster than we expect.”
Author
FXStreet Insights Team
FXStreet
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