The Brazilian real weakened to around 5.23 per USD in October, mirroring broad gains in the US dollar against other emerging-market currencies. The greenback has been on an upward trajectory amid expectations of further Federal Reserve tightening, as persistent inflationary pressures related to the Middle East conflict coincide with the continued resilience of the US economy.
Domestically, the approaching election is adding a layer of political risk, with recent polls pointing to a tightly contested presidential race and shaping market sentiment. On the macroeconomic front, Brazil’s manufacturing sector recorded its steepest deterioration in operating conditions since April 2023, according to S&P Global PMI data.
Meanwhile, labor market indicators continue to signal a gradual cooling, in line with expectations for broadly flat GDP in the third quarter of 2026. This is occurring despite relatively strong payroll data and has helped reinforce market expectations that the Selic rate-cutting cycle will continue.
