Given President Lula’s comments suggesting expenditures will not be cut to meet the new 2024 fiscal target, we expect USD/BRL to resume its upward path towards 5.10, and on a break above that level, retest the 5.20 mark in line with our year-end forecast. 

As for the Selic rate, we expect the BCB to maintain the current pace of rate cuts in December, bringing it to 11.75% by the end of 2023 and another 50 bps rate cut in the first meeting of 2024, after which we expect the BCB to adjust its forward guidance (likely a slower pace of rate cuts as fiscal risks materialize/persist).