USD/BRL steady around 3.27

USD/BRL has been trading steady following days of uncertainty and volatility. After reaching momentarily levels on top of 3.40, the pair pulled back and stabilized below 3.30.  

Since last Monday, it has been moving in a small range, between 3.25 and 3.29. The Brazilian real is still among the worst performers in May. Practically all losses took place 10 days ago, following accusations that President Temer authorized bribes. 

Events ahead 

Political events will be watched closely by investors during the next days. Temer said he will not resign but tensions and uncertainties remain elevated. 

In the economic front,  the Central Bank of Brazil meets on Wednesday. “Is expected to cut rates 100 bp to 10.25%.  However, a small minority expect a 75 bp cut. IPCA inflation was 4.1% y/y in April, in the bottom half of the 2.5-6.5% target range.  However, political uncertainty and delays to fiscal reforms could lead COPOM (Monetary Policy Committee) to cut less aggressively”, said analysts from Brown Brothers Harriman. On Thursday GDP and trade data will be released. Market consensus points to a positive reading of growth (q/q).