The Brazilian real is expected to strengthen on Monday after trading near a six-month low last week, as investors respond to Flávio Bolsonaro’s stronger-than-anticipated performance in the first round of the presidential election. Bolsonaro captured 47.03% of valid votes, ahead of incumbent Luiz Inácio Lula da Silva, who received 45.16%, setting the stage for a runoff on October 25.
The outcome is likely to be interpreted positively by investors who regard Bolsonaro as more committed to addressing Brazil’s fiscal challenges and curbing government spending. As a result, markets may begin to price in a higher probability of fiscal consolidation and, over time, the prospect of lower borrowing costs.
Nonetheless, the race remains undecided, and the tight first-round margin suggests volatility could stay elevated as the campaign enters its final weeks.
