The Brazilian real traded around 5.19 per USD in June, hovering near its weakest level in two months as broad-based dollar strength persisted amid escalating tensions in the Middle East. Market anxiety deepened after a US helicopter was shot down near the Strait of Hormuz, triggering retaliatory US strikes and bolstering demand for safe-haven assets.
At the same time, persistently high US inflation and a tight labor market reinforced expectations that the Federal Reserve will maintain a hawkish stance. Domestically, investors followed a new poll indicating that President Lula has widened his lead over Senator Flávio Bolsonaro.
Brazil’s economic data remained solid: GDP grew 1.1% in the first quarter, beating forecasts, while annual inflation quickened to 4.39% in April. Against this backdrop, market pricing now points to a likely pause in the central bank’s easing cycle at next week’s meeting, with investors increasingly positioning for the next move in interest rates to be a hike rather than another cut.
