Following the decision of the Federal Open Market Committee (FOMC), the Central Bank of Brazil is expected to cut rates again by 50 basis points. ING economists analyze the USD/BRL waiting for the decisions of the central banks.
The BCB will apply another rate cut of 50 basis points
Brazil’s interest rate swap band foresees cuts of slightly more than 50 basis points at each of the three BCB meetings this year (including today). There could be slight disappointment if the BCB sticks firmly to the script of 50 basis point cuts for the foreseeable future.
However, Brazil’s strong growth, solid carry trade demand and very positive real rates provide good support for the currency.
Assuming the Fed does not take a hawkish stance today, carry trade demand should dominate and push USD/BRL towards the 4.80 area.
Source: Fx Street
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