FX.co ★ Brazilian Real Slips Ahead of BCB Monetary Policy Decision

The Brazilian real weakened to around 5.50 per US dollar in November, its lowest level since it briefly touched 5.60 immediately after President Lula’s runoff victory over Jair Bolsonaro. Investors were closely watching the upcoming Copom decision after the first Focus Bulletin released since the election pointed to higher projections for inflation, interest rates, and the exchange rate, while growth expectations were revised downward. At the same time, the S&P Global Brazil Manufacturing PMI for October remained in contractionary territory. Most market participants expect the benchmark Selic rate to be kept unchanged at 13.75% per year, amid mounting concerns about Brazil’s fiscal outlook. Worries over the lack of fiscal consolidation have intensified in the face of uncertainty about key appointments, including the Finance Minister, and about the overall direction of fiscal policy in Lula’s next term.