Brazil: Capping the easing cycle - Rabobank

For the week of May 07-11, Brazilian assets kept weakening amid a sell-off of EM assets as BRL lost another 2% for the period, closing at 3.60/USD – a fresh new weakest level since mid-2016, points out the research team at Rabobank.

Key Quotes

“It stood among the worst performers among major currencies.”

“In the rates space, the belly and long end of (DI futures) yield curve put back some respectable premium, with rates rising 20-30bps for the week.”

“On the data front, April IPCA pointed to tame inflation pressures across the board, and March retail sales painted a good picture for consumer spending, despite softening data elsewhere.”

“This week’s calendar has monetary policy and activity on the spotlight. On Wednesday, the BCB announces interest rate. We (and most market players) look for another 25-bp cut to 6.25%, a new historical low and likely the last move in this cycle. Earlier on the same day, the BCB publishes March’s IBC-Br, its monthly activity index (sort of a monthly GDP proxy).”