Goldman Sachs projects the Brazilian real could trade between 4.50 and 4.80 per U.S. dollar after first-round election results that markets read as friendly to tighter fiscal policy. Senator Flávio Bolsonaro outperformed polls with 47.1% of the vote, ahead of incumbent President Lula's 45.1%.
Goldman Sachs projects the Brazilian real could trade in a range of 4.50 to 4.80 per U.S. dollar following election results the bank views as market-friendly and supportive of tighter fiscal policy.
Senator Flávio Bolsonaro won 47.1% of valid votes in the first round, outperforming recent polling. Incumbent President Lula secured 45.1% of votes. Pro-Bolsonaro and right-of-center candidates generally outperformed expectations in Senate and gubernatorial races, Goldman Sachs said.
Trading at 4.80 would be consistent with the residual fiscal premium from the 2024 real depreciation episode fully compressing, as well as longer-run valuations, Goldman Sachs said. The real could appreciate beyond these levels if fiscal consolidation efforts justify a positive fiscal premium and the external backdrop is also supportive, the bank added.
First-round results could provide meaningful information to market participants and drive a large foreign exchange market response, Goldman Sachs said. The real's performance heading into the first round had been more range-bound than in prior elections, the bank noted. A plausible exchange rate for USD/BRL depends on an election outcome perceived as market-friendly and conducive to a tighter fiscal stance, Goldman Sachs said.
Source: Forex News
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