FX.co ★ Brazilian Real Weakens After PMI

The Brazilian real appreciated toward 5.35 per US dollar, distancing itself from the June 2024 high of 5.28 observed on September 23rd. This movement comes as markets adjusted their expectations for earlier and more significant easing by the central bank, following a pronounced slowdown in domestic economic activities. S&P Global’s composite PMI fell to 46.0 in September, marking the sharpest decline in nearly four and a half years. This indicates a contraction in new orders, output, and services receipts, which could potentially weaken short-term growth and corporate cash flow, subsequently diminishing the demand for real assets, despite the Selic rate remaining high. Communications from Copom stressed a reliance on data and maintained an openness to policy adjustments, which the markets interpreted as an indication of potential rate cuts sooner than previously anticipated. Surveys within the private sector, along with economist polls, have shifted their median forecasts towards rate cuts in early 2026, with market pricing adapting to this outlook.