Brazil is struggling on both the humanitarian and the financial frontы. As a result, Brazilian real is weakening
USD/BRL jumped to record highs
USD/BRL rose to the record high above 4.63 on Thursday, March 5. So far, the Brazilian real has been the worst performing currency this year.
What is the reason of the move?
Traders sell the BRL as they believe that Brazilian central bank will follow the Federal Reserve and slash interest rates. The nation’s regulator on Tuesday said that it is monitoring the impact of the coronavirus outbreak on financial markets and the wider economy. The next meeting of the Banco Central do Brasil is scheduled on March 18. The local financial market currently prices in a 60% chance of a rate cut.
Brazil last cut the policy rate by 25 basis points on February 5 and suggested that it had ended its record-breaking monetary easing cycle.Yet, now it seems that back then the cetral bank had been too optimistic.
Looking at the chart
USD/BRL is currently at the uncharted territory: no previous highs may serve as targets. As a result, we can target only some round levels like 4.650 and 4.700. Support is at 4.5225.
We could gain from buying emerging-market currencies such as South African rand, Mexican peso and Brazilian real.
Let’s consider the best and the worst-performing assets as Monday’s session kicks in.
Australia will publish its Inflation Rate on January 25, at 02:30 MT time.
Germany will release the flash Purchasing Managers' Index (PMI) for manufacturing and services industries at 10:30 GMT+2 on January 24.
Leibniz Centre for European Economic Research (ZEW) will release an economic sentiment index for Germany on January 18, 12:00 GMT+2