FX.co ★ Brazilian Real Extends Strong Momentum

In June, the Brazilian real appreciated against the US dollar, nearing 5.5, its highest point in eight months. This strengthening can be attributed to a weakening US dollar, influenced by traders reducing their risk-averse positions following reports of potential nuclear negotiations between Iran and Israel. On the domestic front, inflationary pressures eased, with May's IPCA inflation rate coming in at 5.32% year-on-year, below projections, diminishing the likelihood of further monetary tightening. Additionally, April's labor market data surpassed expectations, with 257,528 formal jobs added and unemployment remaining near historic lows, thus supporting real yields and boosting consumer spending. Although May's trade surplus narrowed to $7.2 billion due to a 0.1% decline in exports, impacted by lower prices for soy, oil, and iron ore, as well as a 4.7% increase in imports, substantial commodity volumes and predictions for a robust agricultural boom continue to support foreign exchange inflows.