Brazil: Q1 recovery to take cues from industrial activity - Rabobank

In the week of Mar 26 – 29, Brazilian assets swung to the tune of global market volatility, but in the end, the BRL tracked an external decompression, posting a better-than-peer weekly performance with small gain of 0.4% (reaching back around 3.30/USD), points out the research team at Rabobank.

Key Quotes

“The belly of the (DI) yield curve kept rallying (for the week, down 12-13bps at 2020s/2021s) as the Copom minutes and Q1 inflation report confirmed the BCB’s flight plan to cut rate in May, with a likely pause in June. The market (ourselves included) continue to perceive odds skewed to the downside when it comes to medium-term inflation and Selic rate forecasts.”

“The reports on real activity out in recent days reaffirm a gradual but consistent recovery.”

“For the coming week, the macro calendar features February industrial production (Tue). The results will provide more colour on the pace of the economic recovery in Q1.”