The gains of the BRL and other EM currencies start to dwindle as local central banks start their easing cycle while global interest rates are kept in restrictive mode. A market repricing of looming Fed cuts could erode carry-trade gains even further.

We see the USDBRL trading at 5.05 by end-2023 and 5.15 by end-2024.

IGP-DI accelerates and deflation period ends. IGP-DI general inflation advanced by 0.05% m/m in August, below our and the market's projections (market: 0.13%; Rabobank: 0.19%). Producer inflation back up after seven months. The producer inflation (IPA) component rose by 0.10% m/m (from -0.61% m/m in July). It is the first time IGP-DI posted a positive number in the year.