Happy Friday! Today, a worrying short-term outlook for the Brazilian market. Banks accused of funding deforestation. Another Bolsonaro rally on the horizon.
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Monetary easing expected to slow down
The short-term scenario for the Brazilian market is a rather turbulent one.
- The Brazilian real has lost considerable ground against the U.S. dollar of late, with its value tumbling by 4.2 percent over the past month. In the same time period, the country’s main stock index fell 2.6 percent. The 10-year bond yield curve has been way up this year, and market observers raised their year-end forecast for benchmark interest rates.
That’s not all. Meanwhile, U.S. retail data suggests that the world’s largest economy may be running too hot to warrant interest rate cuts. When interest rates are higher in the U.S., money tends to migrate from riskier economies such as Brazil.
👉 Why it matters. The current conditions make it less likely that the Central Bank will keep its recent pace of interest rate cuts — meaning that borrowing costs in Brazil...