Brazil experiences large macroeconomic imbalances

The Brazilian real traded with a good tone on Tuesday gaining around 1.2% to the USD and closing at USD-BRL 3.089. The BRL traded at the tune of domestic news largely ignoring the global backdrop that continues to watch the Greek saga. 

Minister Levy was in the tape stating how Brazil continues to engineer further ways to strengthen public finances with tax proposals likely to be voted by the end of June. In addition to the Ministry of Finance efforts, markets continue to digest the probability of higher rates as the central bank (COPOM) did not signal the end of the tightening cycle and still sounds hawkish in its last minutes published last week. 

According to Commerzbank, even with the significant improvements that the Brazilian government is doing, the BRL is likely to weaken in the medium-term as a result of the large macroeconomic imbalances that Brazil still faces.