The outlook remains hazy for BRL
Head of FX Strategy, Saxo Bank Group
Summary: Brazilian president-elect Jair Bolsonaro's win has attracted positive sentiment but the BRL outlook remains hazy.
Credit spreads have improved sharply in the Brazilian real’s favour, essentially matching the lowest levels since the spring of this year and generally outperforming most other emerging market currencies with notable USD-denominated debt.
The outlook for BRL, however, remains hazy. On the one hand, the market-friendly stance of an adviser like Guedes looks great in principle, but could such views suddenly recede if an issue arises where the popular majority is looking for a handout?
Bolsonaro, for instance, was initially in favour of the truckers who shut down the country earlier this year over fuel price rises, and chaos only averted when expensive subsidies were announced. Could Mr. Bolsonaro be bullied by the crowd on an issue like this or even more importantly, the regressive and expensive pension system, which simply must be changed to avert a longer run fiscal disaster?
I suspect that the Brazilian president-elect’s priorities will mostly be geared toward public order and keeping "the crowd" happy, with less of a focus on liberal economic policy, but time will tell and Bolsonaro could surprise in either direction.
For more on Bolsonaro and Brazil, see Saxo Bank Head of Equity Strategy Peter Garnry's take on Brazilian stock markets.
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)