3 May 2016
BRL exposed to political effervescence – Rabobank
The Brazilian currency remains exposed to the domestic political scenario, argued Christian Lawrence, Strategist at Rabobank.
Key Quotes
“BRL is the best performing currency this year, rallying over 12% with risk premia subsiding amid market expectations about changes in the political landscape. The lower house has approved the impeachment process which now leaves the Senate to vote on this (first vote in May, second in Q3)”.
“Economic data remains weak with Q4 GDP showing a 5.9% y/y decline while the composite PMI remains deep in contractionary territory at 40.8. At the same time, although inflation is falling, at 9.3% it remains very high and the unemployment rate continues to rise (8.2%)”.
“Until the political situation calms, fiscal matters continue to deteriorate and S&P downgraded Brazil to BB”.
“The political developments remain key for BRL but we expect USD/BRL to end the year higher than current levels”.
Key Quotes
“BRL is the best performing currency this year, rallying over 12% with risk premia subsiding amid market expectations about changes in the political landscape. The lower house has approved the impeachment process which now leaves the Senate to vote on this (first vote in May, second in Q3)”.
“Economic data remains weak with Q4 GDP showing a 5.9% y/y decline while the composite PMI remains deep in contractionary territory at 40.8. At the same time, although inflation is falling, at 9.3% it remains very high and the unemployment rate continues to rise (8.2%)”.
“Until the political situation calms, fiscal matters continue to deteriorate and S&P downgraded Brazil to BB”.
“The political developments remain key for BRL but we expect USD/BRL to end the year higher than current levels”.