**USD/BRL Forecast: Brazil’s Real Under Pressure Ahead of 2024 US Data**
*Based on original reporting by the Mitrade news team*
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The foreign exchange market continues to watch the USD/BRL currency pair with keen interest as 2024 unfolds. The Brazilian real (BRL) has seen persistent volatility in recent sessions, influenced by evolving macroeconomic conditions both domestically and abroad. With the US dollar (USD) remaining strong amidst ongoing Federal Reserve policy debates and a string of important US economic data ahead, the outlook for the real in relation to the dollar has garnered attention from investors, traders, and policymakers.
This article draws from the latest coverage by the Mitrade financial team and expands on the factors shaping the USD/BRL exchange rate, providing an in-depth analysis of market dynamics, economic indicators, and potential scenarios as we move further into the year.
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**USD/BRL: Recent Performance and Market Overview**
In the first half of 2024, USD/BRL experienced considerable swings. The pair has found support above the 5.3 handle, with resistance seen near 5.4. These levels are shaped by both technical and fundamental factors, including external risk sentiment and Brazil’s monetary policy moves.
**Key drivers of the recent USD/BRL action include:**
– Global risk appetite
– US interest rate expectations
– Brazil’s fiscal and monetary policies
– Political developments in Brazil
– Commodity prices, particularly soybeans, iron ore, and crude oil, which are significant for Brazil’s export sector
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**Macro Backdrop: US Economic Data and the Federal Reserve**
The main influence on global currency markets—and particularly on emerging market currencies such as the real—remains the US economic outlook. As the Federal Reserve keeps markets guessing about the timing and extent of possible rate cuts, each piece of data from the US carries greater weight.
**Upcoming US data releases to watch:**
– Non-farm Payrolls reports
– Consumer Price Index (CPI) and inflation readings
– Retail sales figures
– Federal Open Market Committee (FOMC) meeting minutes
A stronger-than-expected jobs report or hotter inflation reading would support the USD, potentially leading to further upside in USD/BRL. Conversely, disappointing US data could revive hopes for rate cuts, offering relief to the BRL and other emerging market currencies.
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**Brazilian Economic Fundamentals**
Brazil’s domestic economic landscape is also pivotal for the real’s performance.
**Monetary Policy and Interest Rates**
The Central Bank of Brazil (BCB) kicked off an easing cycle in late 2023, trimming the Selic benchmark rate following a period of aggressive hiking to combat inflation. After lowering the rate from its multi-year highs, the BCB has recently signaled a more cautious approach due to the uncertain global environment and persistent domestic price pressures.
**Inflation**
Brazil’s inflation rate, known as the IPCA, has moderated from its post-pandemic peak but remains a key concern. Food and fuel prices, along with services inflation, continue to be closely monitored by analysts and the central bank for signs of stickiness.
**Fiscal Policy and Public Finances**
Brazil’s fiscal dynamics are a persistent point of vulnerability for the real. Government efforts to rein in deficits, reform pensions, and control spending remain crucial for investor confidence. Any slippage or signs of political unwillingness to stay the course on fiscal discipline could weigh heavily on BRL.
**External Accounts**
Brazil boasts a relatively sound current account position, aided by robust commodity exports. However, global commodity price volatility sometimes leads to sharp swings in trade balances and capital flows, impacting the exchange rate.
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**Political Developments and Market Sentiment**
As with many emerging markets, Brazilian politics have a significant bearing on market sentiment around the real. The government’s ability to enact structural reforms, economic stimulus, and prudent fiscal management is constantly under the microscope. Political turmoil or surprises can trigger risk
Read more on GBP/USD trading.