In the view of BofA Merrill Lynch Global Research, the bearish tone is set to
remain around the Brazilian currency.
Key
Quotes
“Disappointing growth will likely lead to an easier
Brazilian Central Bank and the market is now pricing in 185bp
of hikes by the end of 2016”.
“We remain bearish BRL and
like buying USD on dips, as the political uncertainty will likely continue. We
forecast the BRL at 4.1 in 2015 and at 4.5 in 2016”.
“We now anticipate
the recession to intensify and last longer, with activity not starting to
recover until late 2016. We still expect GDP to contract 3.3% in 2015, but we
revised our GDP forecast for 2016 to -3.5% from -1.4%”.
“We believe the
government will face serious challenges in passing fiscal measures in Congress,
as political noise remains high. This increases the uncertainty about the timing
of a rebound in confidence levels and inhibits investments for a longer period
of time”.
“In addition, purchasing power should decline further given
high inflation, a loosening labor market, a tighter credit market and higher
taxes”.
