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The Brazilian real is expected to trade at slightly weaker levels against USD by year-end; it would seem that the financial markets are very optimistic regarding the new government’s willingness to implement reforms, according to the latest research report from Commerzbank.
The run-off in the Brazilian Presidential elections between the right-wing populist Jair Bolsonaro and Fernando Haddad of the Workers’ Party will take place on Sunday. In the polls Bolsonaro is leading by over 10 percentage points and it therefore seems quite likely that he will become the new President as of January.
Bolsonaro’s victory is largely priced in so that BRL gains on Monday are likely to be limited. Focus will now probably rest on Bolsonaro’s appointments and the political course he is going to take, mainly as regards reforms, the report added.
It is also unclear who is going to be governor of the central bank. The incumbent Ilan Goldfajn stated recently that he was considering stepping down. Bolsonaro’s economic advisor Paulo Guedes on the other hand would like Goldfajn to remain in office.
Under his leadership the central bank acquired a high degree of credibility over the past two years. It is probably partially owed to the central bank that BRL was able to stand up reasonably well over the past years despite the political chaos.
