20 Jan 2015
USD/BRL drops ahead of central bank decision
FXStreet (Córdoba) - The Brazilian real is among the top performers on Tuesday ahead of the Monetary Policy Committee (COPOM) meeting to be held on Wednesday. The USD/BRL pair was falling more than 1%.
Yesterday the pair rose to 2.663 but then pulled back and ended around 2.651. Today it moved with a bearish bias all day and bottomed at 2.608, the lowest price since January 15. From a technical perspective USD/BRL remain in a range with resistance around 2.650 and support above 2.6000. Stocks in Brazil were still in positive territory with the Bovespa index up 0.25% but far from the highs.
COPOM meeting
Tomorrow the Central Bank of Brazil will announce its decision on monetary policy. A rate hike of 50 bp from 11.75% to 12.25% is expected, as it did at the December meeting. “With deflation now established as one of the dominant themes in markets and after the three surprise cuts by EM central banks (India, Peru and Egypt) last week, investors have become rightfully biased towards expecting more dovish surprises. We think Brazil is the wrong place to look for one, at least at the upcoming meeting”, explained Ilan Solot, EM Currency Strategist at BBH.
Yesterday the pair rose to 2.663 but then pulled back and ended around 2.651. Today it moved with a bearish bias all day and bottomed at 2.608, the lowest price since January 15. From a technical perspective USD/BRL remain in a range with resistance around 2.650 and support above 2.6000. Stocks in Brazil were still in positive territory with the Bovespa index up 0.25% but far from the highs.
COPOM meeting
Tomorrow the Central Bank of Brazil will announce its decision on monetary policy. A rate hike of 50 bp from 11.75% to 12.25% is expected, as it did at the December meeting. “With deflation now established as one of the dominant themes in markets and after the three surprise cuts by EM central banks (India, Peru and Egypt) last week, investors have become rightfully biased towards expecting more dovish surprises. We think Brazil is the wrong place to look for one, at least at the upcoming meeting”, explained Ilan Solot, EM Currency Strategist at BBH.