USD/BRL can hover around 5.30 despite insurrection in Brasilia – Wells Fargo

Over the weekend, supporters of former President Jair Bolsonaro stormed Brazil's capital. But insurrection in Brasilia does not change Wells Fargo’s outlook.

Riots unlikely to disrupt Brazil

“While political risk is typically elevated in Brazil and could weigh on local asset prices, we believe Brazil's ‘January 6 moment’ will not have a long-lasting impact on local financial markets nor the economy.” 

“Despite more elevated political risk, we maintain our view that the USD/BRL exchange rate can hover around 5.30 by the end of Q1-2023 and that the Real can strengthen by the end of this year toward 5.00.” 

“We also believe this past weekend's events will not alter the course of Brazilian Central Bank (BCB) monetary policy, and we continue to believe policymakers will begin an easing cycle in Q3 of this year. In addition, our base case scenario for a mild and modest economic recession by the middle of this year is still intact.”