GBP/BRL Outlook:
Bearish, as the rate is below its recent average and near recent lows, pressured by both domestic and global factors.
Key drivers:
- Rate gap: The Bank of England's cautious stance contrasts with Brazil's steady interest rates, favoring the BRL.
- Risk/commodities: Oil prices have surged, which can benefit the BRL by boosting Brazil's export revenues from oil-related sectors.
- Macro factor: The lack of solid UK economic data and political uncertainty has made the GBP vulnerable, with recent GDP growth failing to impress.
Range:
The rate is likely to drift lower within its recent 3-month range, reflecting the current bearish outlook.
What could change it:
- Upside risk: A surprise GDP increase in the UK, signaling stronger economic recovery, could lift the GBP.
- Downside risk: Continued strength in the US dollar could further depress the BRL, leading to a weaker GBP/BRL rate.
