This week is full of G10 central bank meetings so there will be less attention on the meeting of the Banco Central do Brasil (BCB) this Wednesday. Therefore, the USD/BRL is set to be driven by the Federal Reserve meeting, but a surprise hike from the BCBC could support the Brazilian real, economists at Commerzbank report.

Break in the rate hike cycle?

“It would come as a surprise if the BCB were to suddenly sound dovish on Wednesday or even signalled rate cuts. It seems more likely that interest rates will remain unchanged while the BCB will keep the door open for further tightening so that the decision is unlikely to put major pressure on BRL. A surprise rate hike might even provide some support for BRL.”

“It has to be said though that the attention of market participants will focus mainly on the Fed meeting this week, which is also being held on Wednesday so that USD/BRL is likely to be mainly driven by the USD side.”