Back
3 Apr 2014
Latin America EM Express: Brazil central bank raises Selic rate to 11%
In line with market expectations, Brazil's central bank decided to hike its benchmark Selic rate by 25 bp to 11% on Wednesday. It also signaled its readiness to raise it further at the upcoming monetary policy meetings.
According to the official statement the central bank's monetary policy committee, or Copom, "will monitor the evolution of the macroeconomic scenario until its next meeting, in order to then define the next steps in its monetary policy strategy."
Brazil's central bank has been tightening policy since April last year, beginning with a 25 bp raise which was follwoed by six consecutibe 50 bp increases and finally this months 25 bp hike.
The BBH Global Currency Strategy Team believe that even though the Copom "left the door open to further hikes" it would rather not do that "especially if BRL remains around these levels."
"The next meeting is May 28, and a move then will depend on how the inflation readings come in," the analysts add.
Economic data
Mexico released Consumer Confidence data on Thursday, which showed an improvement to 88.8 in March, from 84.5 seen in February.
Technicals
The USD/BRL dropped by 0.38% to 2.2782 on Wednesday. The daily FXStreet Trend Index was strongly bearish, with the OB/OS Index neutral. RSI sat at 31 at the last close, and has headed higher to 55 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 349 pips, with ATR (14) at 277 pips. The 1D 200 SMA was at 2.3076 , while the 1D 20 EMA was at 2.3102.
According to the official statement the central bank's monetary policy committee, or Copom, "will monitor the evolution of the macroeconomic scenario until its next meeting, in order to then define the next steps in its monetary policy strategy."
Brazil's central bank has been tightening policy since April last year, beginning with a 25 bp raise which was follwoed by six consecutibe 50 bp increases and finally this months 25 bp hike.
The BBH Global Currency Strategy Team believe that even though the Copom "left the door open to further hikes" it would rather not do that "especially if BRL remains around these levels."
"The next meeting is May 28, and a move then will depend on how the inflation readings come in," the analysts add.
Economic data
Mexico released Consumer Confidence data on Thursday, which showed an improvement to 88.8 in March, from 84.5 seen in February.
Technicals
The USD/BRL dropped by 0.38% to 2.2782 on Wednesday. The daily FXStreet Trend Index was strongly bearish, with the OB/OS Index neutral. RSI sat at 31 at the last close, and has headed higher to 55 so far today. Daily 2-StDev Volatility Bandwidth was expanding at 349 pips, with ATR (14) at 277 pips. The 1D 200 SMA was at 2.3076 , while the 1D 20 EMA was at 2.3102.