Yann Quelenn
Swissquote Bank Ltd
As Brazil’s central bank is expected to drop its prime lending rate to an all-time low of 7%, and demand for the USD rises with the US Federal Reserve’s impending rate hike, the real should continue to weaken against the greenback. Since the start of the year, the USD/BRL has been trading between 3.1 and 3.4. Brazilian rates have fallen by half in the past year, and 2018 might see further cuts. Capital outflows are likely to accelerate, as the interest-differential to the USA narrows.
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The interest rate cut is driven by inflation, which surprisingly stands way below the official target. Banco Central do Brasil is targeting inflation at 3-6%, yet consumer prices have dived from double digit to less than 2% growth. Inflation for November is expected to print at 2.88% annually.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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