30 Apr 2015
USD/BRL could resume the upside medium term – TDS
FXStreet (Edinburgh) - Cristian Maggio, Strategist at TD Securities, sees the pair to gather further traction in the medium term despite the BCB tightening.
Key Quotes
“The BCB followed the script and hiked the Selic rate by 50bp to 13.25% yesterday. The decision was unanimous and the statement a carbon copy of the prior one from the March 4 meeting, which logically suggests that the Copom is not done yet with tightening and more is to come, possibly at the same pace, with the Copom possibly lifting the Selic to 13.75% as early as June 3”.
“So for now, until we read the minutes next Thursday and gain a little more clarity on the decision, our best guesstimate is that the BCB will add another 25-75bp to the Selic rate. Therefore, we extend our forecast pencilling in a final 50bp hike at June 3 meeting, but also move the start of the easing cycle earlier than previously thought to Q4 2015 from Q1 2016”.
“We expect the market reaction to be hawkish both on rates and FX today as several investors were positioned for a change in rhetoric that hasn’t happened just yet. In particular, if general sentiment remains risk prone, we may see USDBRL moving closer to 2.90. But this is likely to be a short term adjustment only as we continue to see direction of the pair skewed towards more substantial BRL weakness”.
Key Quotes
“The BCB followed the script and hiked the Selic rate by 50bp to 13.25% yesterday. The decision was unanimous and the statement a carbon copy of the prior one from the March 4 meeting, which logically suggests that the Copom is not done yet with tightening and more is to come, possibly at the same pace, with the Copom possibly lifting the Selic to 13.75% as early as June 3”.
“So for now, until we read the minutes next Thursday and gain a little more clarity on the decision, our best guesstimate is that the BCB will add another 25-75bp to the Selic rate. Therefore, we extend our forecast pencilling in a final 50bp hike at June 3 meeting, but also move the start of the easing cycle earlier than previously thought to Q4 2015 from Q1 2016”.
“We expect the market reaction to be hawkish both on rates and FX today as several investors were positioned for a change in rhetoric that hasn’t happened just yet. In particular, if general sentiment remains risk prone, we may see USDBRL moving closer to 2.90. But this is likely to be a short term adjustment only as we continue to see direction of the pair skewed towards more substantial BRL weakness”.