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Brazil's central bank cut its benchmark Selic rate by a half percentage point to a record low of 6%, more than the 18 of 45 economists surveyed by Bloomberg had forecast. Policymakers said below-target inflation forecasts for 2020 leave room for further easing, and the economy is expected to grow less than 1% this year.
Lower Brazilian rates and expected further easing tend to weaken the real, which raises USD/BRL and can make dollar-priced Brazilian feed exports less competitive while supporting domestic demand.
dailymaverick.co.zaBloombergAug 1, 2019After 301 past bullish macro events, Brazilian Real (BRL per USD) moved a median +0.4% over 5 sessions (57% higher; middle half -1.2% to +1.7%), and +1.0% over 20.
Moves of each commodity's benchmark from the last close before the event. Historical reads pool past events of the same kind; they describe what happened, not what will. Not investment advice.
A larger-than-expected 50bp Selic cut to a record-low 6% with signaled further easing reduces BRL carry appeal and yield support, plausibly driving capital outflows and BRL depreciation (higher BRL per USD), though other global factors (e.g., Fed/trade-war risk-off around the same date) may have also contributed.
The larger-than-expected Selic cut to a record-low 6% on 2019-08-01, with signals of more easing, narrowed Brazil's interest-rate differential and weakened the real, which contributed to the BRL per USD rise in the window.
