USD/BRL set to trade in a 4.70-5.00 range in the month ahead – SocGen
|Economists at Société Généralestay positive on the BRL and see the local swap curve bull-steepening.
Staying sanguine on BRL, and expecting swap curve to bull steepen
We maintain our call to go long the BRL on any weakness. The easing risk premium, still-high carry and low volatility, coupled with small external imbalances and efforts to reduce fiscal risks, should support the currency. The undemanding valuations, light positioning, and high terms of trade should also help. Finally, once the dust settles in the external environment, the end of the Fed’s tightening cycle, lukewarm global growth, and easing global financial conditions as the year progresses should all add to the positive picture.
We see USD/BRL trading in a 4.70-5.00 range in the month ahead.
We still expect the swap curve (DI33-25) to bull steepen as the central bank is likely to continue cutting rates, by perhaps 50 bps in each of the next three meetings – moving towards 11.75% by year-end. The long end is set to benefit from the smaller risk premium but should show more of a range bound pattern.
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.