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Brazilian real steadies as USD/BRL slips toward 5.00
Societe Generale said USD/BRL fell to 5.07 after soft US producer price data cooled Treasury yields, and a second close below the 50-day moving average could shift focus back to 5.00.
Societe Generale flagged that USD/BRL has backed off after earlier pressure near 5.20, with the pair retreating to 5.07. The bank linked the firmer tone in the Brazilian real to softer US producer price index data and lower Treasury yields, which reduced dollar strength.
In FXStreet’s writeup, the bank said a second daily close below the 50-day moving average could create room for USD/BRL to move back toward 5.00. It also pointed to improving odds for President Lula retaining power in Brazil’s October election.
Societe Generale cited survey data from Genial/Quaest showing Lula leading challenger Flavio Bolsonaro by 8 percentage points in a potential runoff scenario, 45% versus 37%. The note also added that Brazil’s trade exposure to the US has fallen to a record low of 9.7%.
The bank argued that, because many of the affected goods are essential commodities, the broader macroeconomic impact is likely limited, though it said the tariff risk may be incrementally negative for Bolsonaro given his perceived closeness to Donald Trump.