CAD/BRL Outlook:
Slightly weaker, but likely to move sideways, given that the rate is below its recent average and mid-range.
Key drivers:
• Rate gap: The Bank of Canada maintains a cautious approach, while the Central Bank of Brazil is holding interest rates stable, affecting capital flow dynamics.
• Risk/commodities: Oil prices are significantly above average, which could bolster the CAD if sustained, as Canada's economy is closely tied to oil exports.
• One macro factor: Brazil's trade surplus, driven by strong agribusiness exports, has helped stabilize the BRL despite global economic pressures.
Range:
Expect the CAD/BRL to hold within its recent range, as current pressures are balanced by the influence of oil prices.
What could change it:
• Upside risk: Sustained increases in oil prices could provide support for the CAD.
• Downside risk: Escalating tensions in U.S.-Canada relations could weaken the CAD further against the BRL.
