Nothing has changed in Brazil

No pause is expected in BRL weakness, as the future of the current government is as uncertain as it was before. We will probably not get any clarity before year-end. Without long-term growth, we cannot envision an optimistic solution to the debt problem. Therefore, higher risk premia is expected in Brazilian assets, including USDBRL. Forecast 4.50 for next year-end.

On Wednesday, the Supreme Court will rule on the impeachment process.

In terms of data, the headline unemployment rate should decline because of seasonal factors; in seasonally-adjusted terms, however, the unemployment rate is expected to increase 30bp, to 8.2%. For retail sales, a 1.1% m/m sa decline is expected in the headline retail sales index, reflecting the strong drop of 7.7% m/m sa in furniture and electronic sales in the Serasa leading indicator. 

Broad retail sales, which include auto and building materials, should experience a stronger decline of 1.5% m/m sa, as auto sales fell by 1.7% m/m sa during the month. Finally, the IPCA-15 release should show an extension of the upward pressure observed in food prices in the November IPCA inflation release, likely reflecting unusual high rain levels. In y/y terms, the forecast is compatible.