FX.co ★ Brazilian Real Strengthens on Tightening Outlook

The Brazilian real has strengthened beyond 5.7 against the USD, nearing its highest level since November 2024, marked previously at 5.65 on March 19th. This shift comes as investors absorb the latest minutes from Copom. The minutes emphasize the ongoing issue of inflation expectations remaining unanchored and hint at further tightening measures ahead. A rate hike of 0.50 percentage points is anticipated in May, followed by a 0.25 point increase in June. These expected adjustments in monetary policy aim to solidify transmission channels, thereby enhancing the yield appeal of Brazilian assets and providing support for the real. Furthermore, consumer confidence in Brazil has improved, climbing 0.7 points to 84.3 in March, which reverses a three-month decline that had taken the index to its lowest point in over two years. Additionally, the possibility of easing additional U.S. tariffs offers relief by enhancing external trade conditions and alleviating pressure on Brazilian exporters.