Forex Investment and Currency Trading

Inflation in Brazil represents a growing challenge for Banco Central do Brasil (BCB), even though IPCA inflation is closer to its target relative to many Emerging economies where inflation is more dramatically exceeding targets. The market implication is for a 25bp hike in rates at the April 16 meeting and a move lower in USD/BRL to 1.65. The targeted IPCA inflation index gained 0.49% mom during February – above expectations for a 0.45% gain. The monthly advance also contributed to pushing yearly inflation to 4.61% yoy from 4.58% in the previous month. Annual inflation has now exceeded the 4.50% central [...]

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Brazil: The weekly central bank survey of market expectations showed a few minor changes in inflation expectations with virtually no shift in the view that inflation will likely remain at relatively elevated levels. Expectations for annual IPCA inflation in 12 months (4.29% from 4.25%) and end of 2008 (4.44% from 4.42%) both edged up slightly. IGP-DI inflation expectations (mostly reflective of wholesale prices) were up to 5.20% from 5.19%, but on a 12-month horizon actually dropped for a fourth straight week to 4.59% from 4.65%.
Economist surveyed continue to expect the Selic unchanged in April, despite last week’s more hawkish than expected [...]

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