Back
13 Mar 2014
Latin America EM Express: Tough decisions ahead of Brazil's central bank as inflation accelerates
FXStreet (Łódź) - Brazil's retail sales including autos grew less than forecast in January, while February inflation accelerated, raising doubts over the future direction of the central bank's monetary policy, which until now was expected to deliver only one more hike following the rise to 10.75% carried out in February.
The BBH Global Currency Strategy Team, who projected only one more increase by 25 bp to 11% at the upcoming monetary policy meeting on April 2 now suggest the although Brazil's central bank „would like to end the tightening cycle then, but may not be able to if current inflation trends continue.”
Following the release of the Brazilian Retail Sales numbers swap rates dropped while the real rose 0.5% to 2.3433 against the dollar.
Two other central banks are due to announce their monetary policy decisions this week. The central bank of Chile could reduce rates by 25 bp to 4% on signs of a slowdown in economic activity. The Peru central bank on the other hand could maintain rates unchanged at 4% despite signs of deceleration, as inflation is still elevated at 3.8% year-on-year recorded in February.
Economic data
On Wednesday Brazil released the IPCA inflation numbers for February, which revealed a 0.69% rise, up from 0.55% recorded in January. According to the BBH Global Currency Strategy Team, further pickup is very probable „as inflation at the producer and wholesale level had already been accelerating since late 2013,” and more upside risks could emerge is electricity prices go up this year.
On Thursday Brazil informed that month-on-month Retail Sales rose by 0.4%in January, compared with the 0.2% drop in December. Year-on-year Retail Sales accelerated to 6.2% from 3.9% and.
Mexico's Industrial Output grew in January by 0.7% on an annual basis, following a 0.3% drop in December. Market consensus pointed to a 0.3% increase.
Technicals
USD/BRL remained in the 2.30-2.40 range, with the daily FXStreet Trend Index slightly bullish, and the OB/OS Index neutral. RSI was neutral at 48.7848 at the last close. Daily 2-StDev Volatility Bandwidth was shrinking at 252 pips, with ATR (14) expanding at 276 pips. The 1D 200 SMA is at 2.2976, while the 1D 20 EMA at 2.3556.
Falling copper prices are weighing on the Chilean peso and 600 could soon become a target for USD/CLP. Support is seen near 560 and then 550.
The BBH Global Currency Strategy Team, who projected only one more increase by 25 bp to 11% at the upcoming monetary policy meeting on April 2 now suggest the although Brazil's central bank „would like to end the tightening cycle then, but may not be able to if current inflation trends continue.”
Following the release of the Brazilian Retail Sales numbers swap rates dropped while the real rose 0.5% to 2.3433 against the dollar.
Two other central banks are due to announce their monetary policy decisions this week. The central bank of Chile could reduce rates by 25 bp to 4% on signs of a slowdown in economic activity. The Peru central bank on the other hand could maintain rates unchanged at 4% despite signs of deceleration, as inflation is still elevated at 3.8% year-on-year recorded in February.
Economic data
On Wednesday Brazil released the IPCA inflation numbers for February, which revealed a 0.69% rise, up from 0.55% recorded in January. According to the BBH Global Currency Strategy Team, further pickup is very probable „as inflation at the producer and wholesale level had already been accelerating since late 2013,” and more upside risks could emerge is electricity prices go up this year.
On Thursday Brazil informed that month-on-month Retail Sales rose by 0.4%in January, compared with the 0.2% drop in December. Year-on-year Retail Sales accelerated to 6.2% from 3.9% and.
Mexico's Industrial Output grew in January by 0.7% on an annual basis, following a 0.3% drop in December. Market consensus pointed to a 0.3% increase.
Technicals
USD/BRL remained in the 2.30-2.40 range, with the daily FXStreet Trend Index slightly bullish, and the OB/OS Index neutral. RSI was neutral at 48.7848 at the last close. Daily 2-StDev Volatility Bandwidth was shrinking at 252 pips, with ATR (14) expanding at 276 pips. The 1D 200 SMA is at 2.2976, while the 1D 20 EMA at 2.3556.
Falling copper prices are weighing on the Chilean peso and 600 could soon become a target for USD/CLP. Support is seen near 560 and then 550.