Brazilian Real: Outlook shaped by election flows and fiscal reform prospects – Societe Generale

The Brazilian Real (BRL) has fallen 3% from its post-election high, with buyers emerging near 5.10, according to Societe Generale. The bank reports increased flows into the currency ahead of the presidential runoff and sees a low hurdle for a move below 5.00 if Bolsonaro wins. A Bolsonaro victory is the institution’s baseline scenario, under which it expects better prospects for fiscal reforms and debt stabilisation.

Brazilian Real Draws Inflows Ahead of Presidential Runoff

"In Latam, flows have been stepped up into the BRL with the presidential runoff only four days away. "

"The real weakened by 3% from the post-election high two weeks ago but buyers emerged at 5.10 last week. The bar is low for a return below 5.00 if Bolsonaro clinches victory on Sunday."

"Two closely watched polls published on Monday showed differences between both candidates are narrowing within the margins of error. "

"Nexus/BTG Pactual puts Bolsonaro ahead by 0.6pp, down from 2.8pp. AtlasIntel/Bloomberg puts the lead at 2.2pp, down from 5.4pp."

"Under our baseline scenario of a Bolsonaro victory, the combination of a more market-friendly executive, a stronger conservative bloc and support from centrist parties should improve the prospects for advancing fiscal reforms aimed at containing mandatory spending growth and ultimately stabilising the public debt trajectory."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)