Brazil: USD/BRL forecast lowered with new political scenario – Deutsche Bank

By FXStreet Jose Faria, Economist at Deutsche Bank, explained that they lowered USD/BRL year-end forecast from 3.70 to 4.0 under the new political scenario, with the impeachment of Dilma Rousseff and the new government of Michel Temer.

Key Quotes:

“Should the Senate accept the petition to put the president on trial for impeachment, she would be forced to step down for up to 180 days. During the president’s trial in the Senate, she would be replaced by Vice President Michel Temer of the PMDB party.”

“Temer’s main challenge will be to re-organize the federal administration and restore the credibility of economic policies, especially on the fiscal front. We believe the new president will have a narrow window of opportunity of approximately three months to present concrete results, as in 2H16 politicians will increasingly focus on the October municipal elections.”

“The economic cycle could help Temer, as the economy seems to be close to rock bottom and inflation is decelerating, thus paving the way for the central bank to initiate an easing cycle in 2H16. Monetary easing could provide much-needed positive news to help restore confidence and stabilize economic activity, also making it easier to pass unpopular measures in Congress. We expect the COPOM to …read more

Source:: FX Street