USD/BRL likely to test all-time high around 4.25 – SocGen

By FXStreet FXStreet (Córdoba) – According to analysts from Societe Generale, if there is no political change, neither structural reforms or an improvement in the external outlook, the US dollar in Brazil is likely to test all-time highs soon.

Key Quotes:

“The BRL is one of the Latam currencies that has escaped the oil-related EM FX rout, falling by only around 2% year-to-date against the USD to USD/BRL 4.04. The economy continues to feel the pressure from falling commodity prices, low domestic demand, political turmoil and the lack of structural reform. We have therefore revised our 2016 growth forecast from -1.4% to -3.2% and see further downside risks to the economic outlook (…) Also, we no longer expect any growth recovery in 2017, and the economy could be in recession for three consecutive years”.

“Due to the worsening economic outlook and rising external uncertainties, the central bank left rates unchanged at 14.25% at its last meeting. The decision was not unanimous, as some members raised concerns about rising inflation expectations. We think that the central bank could be forced to continue its rate hiking cycle if inflation accelerates further.”

“We anticipate that the current growth/inflation outlook will result in a steady depreciation of …read more

Source:: FX Street