USD/BRL - WEEK CHART

Hi, today we are going to talk about USDBRL and its current landscape.

The emerging markets today can face an increase of volatility and perhaps pessimism as Trump's stated that will reinstate Steel and Aluminum tariffs for Brazil and Argentina since, in his perspective, both countries are devaluating their currencies to be "unfairly" competitive in the sale of agricultural goods, which is harmful to U.S farmers. We must remember that since the beginning of the Trade War, China has stepped into the gas pedal in buying Brazilian agricultural goods, and the Brazilian currency has reached new record lows against the U.S dollar after falling more than 8% this year, which theoretically bases Trump's argument. This could be bad news for the market if imply a new Trade War front against these Latam countries that don't have China firepower to sustain a tariff battle against the U.S.

Trump's movement could be interpreted as an endeavor to take these competitors of the road, to try to suffocate China's lifeline of agricultural goods, and maybe force them to become more friendly with the idea of expanding their spending on U.S agrarian goods.
For Brazil, it's tough news to swallow since its foreign policy during Bolsonaro mandate, has been based in bending the knee for the Trump, without asking nothing meaningfully in return, which has already pushed away other emerging countries from had a closer relationship with the country. Now Brazil has a hard lesson to learn that in the sovereignty game if you behave like a vassal, you can be discarded like one.
For the future perspective, the dilemma is that if the Brazilian government intervene in its currency and stop or even reverse the devaluation, they might hurt their support among Brazilian farmers that are the bedrock of this government, but if they keep the devaluation U.S could impose another round of tariffs and push the country to a brink of an economic crisis, now it’s up to Bolsonaro administration to rule the fate of the country, since Trump isn't to going to show any mercy in his strategy to be re-elected.

Thank you for reading and leave your comments if you like.
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