The external scenario remains challenging for the BRL now, due to market adjustments to the high-for-longer Fed monetary policy stance, elevated UST yields, strong USD, and rising global financial conditions. However, the central bank’s gradual but vigilant monetary policy easing stance that could imply fewer rate cuts than originally anticipated, along with resilient GDP growth, improving external imbalances and strong capital inflows, should be supportive of the local currency when external conditions settle and risk appetite improves. 

Moreover, a lower risk premium, because of less fiscal uncertainty, and constructive technical factors, like neutral to cheap valuation, high carry to vol, supportive terms of trade, and net long USD positioning, should also support the BRL. 

We expect USD/BRL to trade in the 4.70-5.00 range during the month ahead.