Brazilian Real Under Pressure as Election Risks Weigh on Exchange Rate
Market analysts at TD Securities warn that Brazil's currency, the Brazilian Real (BRL), faces significant risks due to the upcoming election cycle. The USD/BRL exchange rate has already tested its 200-day Simple Moving Average (SMA) resistance over the past month.
In a comparison with 2014, TD Securities notes that the correlation between USD/BRL price actions in 2026 and 2014 is over 70%. This suggests that market concerns about Brazil's fiscal outlook may lead to higher USD/BRL rates in the near term.
The bank points out that in 2014, the USD/BRL rate began to rise in September as markets grew concerned with President Dilma Rousseff's fiscal policy stance. Similarly, current polls indicate that former President Lula is likely to win the election and may not prioritize fiscal consolidation, potentially putting pressure on the BRL.
TD Securities maintains its forecast of 5.30 USD/BRL for H2 2026 and advises against owning BRL for carry in the near term due to these risks.