HALISTER1: Brazil Reforms Optimism Bolsters BRL; DI Drops on CPI: Analysts

Brazil Reforms Optimism Bolsters BRL; DI Drops on CPI: Analysts

(Bloomberg) -- President Temer’s pledge to spend his political capital to boost reforms helps ease concerns on still slow pace of measures approval, buoying BRL, while DI rates fall on fresh signs of inflation easing, analysts say.
  • “Temer’s biggest asset, which also makes him different from Rousseff, is his political ability,” says Jason Vieira, chief economist at Infinity Asset Management; “He’s showing we’re on the right track”
    • Temer likely to approve bill capping public spending this year; pension regime reform to pass in Congress in 2017
    • Swap rates drop reflect survey by some private banks showing that inflation recently has slowed; also bellow- est. Sao Paulo CPI released earlier today helped to improve sentiment, Vieira says
  • NOTE: BRL rises for third day outperforming peers after Temer tells Bloomberg he will push ahead with unpopular measures to revive a trouble economy
  • “The Temer interview helps, even though it didn’t bring much news. It is important to reinforce commitment with reforms,” Italo Lombardi, senior economist for Latam at Standard Chartered Bank says in a phone interview
    • Lombardi says BRL may strengthen up to 3.00/USD in 2017 with reforms optimism helping to ease inflation further and opening room for BCB to cut Selic to 10.25%, from current 14.25%
  • The most remarkable news is that he’s committed to focus on the economic adjustment, instead of the elections, Carlos Kawall, economist at Banco Safra says
  • NOTE: Michel Temer Vows to Spend Political Capital on Reforming Brazil
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Jason Vieira (Infinity Asset Management Administracao de Recursos)
Carlos Kawall Leal Ferreira (Banco J Safra)
Italo Lombardi (Standard Chartered PLC)
Michel Temer (Federative Republic of Brazil)

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