USD/BRL: Positive underlying tone in Real trade over the coming days – Commerzbank

USD/BRL trades around 5.00 again. This indicates that the outlook for the Brazilian Real is improving, economists at Commerzbank report.

Promising framework for BRL

“The market received the new fiscal plan positively. What was decisive for the market, for now, was that the government-linked spending curbs to the development of revenue and the targets of the primary balance, i.e. actually measurable variables, which should reduce the risk of escalating national spending.”

“Short-term, we see a high likelihood that BRL will establish itself at high levels, in particular as President Lula da Silva will today set off on his long-awaited visit to China. The hopes for deeper economic ties and further Chinese investments in Brazil point towards a positive underlying tone in BRL trade over the coming days.”