USD/BRL: Leading to the 2002 highs amid political noise – Deutsche Bank
The most pressing challenge in Brazil is containing the COVID-19 epidemic, according to strategists at Deutsche Bank, who expect the USD/BRL pair to between 6.00 and 6.50 amid political tensions.
CIBC forecast USD/BRL at 5.50 for Q2
Key quotes
“The peak in Brazil's epidemic curves seems to be between two to four weeks away and it is likely that by year-end more COVID–19 deaths are registered in Brazil than in almost any other country as even if the reproduction rate settles at 1.5 a fatality rate of 0.5% will imply roughly 350,000 deaths.”
“We expect a 6.2% contraction of GDP in 2020 with an underlying drop of private consumption of roughly the same magnitude and a decline in investments of more than twice that of the overall economy. We expect a primary deficit of roughly 8.8% of GDP this year and for public debt to exceed 90% of output.”
“In the near-term, the public dissaving, extra loose monetary policy, and almost complete absence of growth will continue to weigh on the BRL. And the rising political noise lead us to expect the USD/BRL to test the highs of 2002 and trade between 6.0 and 6.5 before retracing back towards 5.5 once political tensions ease.”
Author
FXStreet Team
FXStreet
