EUR/BRL Outlook:
Slightly weaker, but likely to move sideways, as the rate is below its recent average and near mid-range.
Key drivers:
• Rate gap: The European Central Bank has maintained its rates amid economic resilience, while Brazil's Central Bank holds a high SELIC rate, supporting the BRL.
• Risk/commodities: Oil prices are at recent highs, which could pressure the BRL due to Brazil's dependence on energy exports.
• One macro factor: Eurozone inflation has fallen below the ECB's target, raising concerns about potential future rate cuts that may weaken the euro.
Range:
The EUR/BRL is likely to hold within the recent range, reflecting limited movement against recent highs and lows.
What could change it:
• Upside risk: A significant improvement in Eurozone economic data could boost the euro's strength.
• Downside risk: Continued pressure from a strong US dollar and unstable oil prices may further impact the euro negatively.