Economists at TD Securities expect very little of note out of the Central Bank of Brazil (BCB) meeting and expect the central bank to sit on hold for the coming months. Regarding the currency, they expect no BRL-relevant outcomes from the meeting. USD/BRL is trading at 5.2745 after starting the month at 5.50.
“We are now entering into what we feel will be a very dull period of time for the BCB, as policy is expected (by us) to remain accommodative and on hold, so long as there are no adverse external shocks that would cause the BCB to react to FX weakness. We think this is a very low probability due to an extended period of Fed dovishness, that will support EM assets and FX.”
“Brazil has shown outperformance relative to expectations for early Q3 data growth data, which is a positive development, but this is unlikely in our view to hold so substantially that Brazil becomes an outperformer (relative to the global economy) in a way that shifts the BCB's policy stance. This leaves it unlikely the BCB will be as hawkish as the rates market prices, outside of the potential for a severe external shock to BRL.”
“With Brazil rates so low and BRL underperformance still evident, despite a severe negative demand-shock that has temporarily pushed the current account balance back into surplus, we don't think the BCB can do much to support BRL at this meeting. It is also unlikely that there is any new dovish bias that would be introduced at the meeting that would hamper BRL. As such, we see it as a BRL-neutral event.”
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.