Report published September 23, 2026

Brazilian Real (BRL): Navigating the Election — Goldman Sachs FX Strategy

Goldman Sachs · September 23, 2026

Ahead of Brazil's October 2026 general election between President Lula and Senator Flávio Bolsonaro, Goldman Sachs assesses potential USD/BRL scenarios using historical election patterns and cyclical fair value models. The authors project USD/BRL trading between 4.50 and 4.80 in a market-friendly fiscal outcome, versus a depreciation to 5.80 if fiscal risk premiums return to late-2024 peaks.

Read the full report

Read the remaining 4 pages

View Report Sign in

Finvaulta summarizes Goldman Sachs's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.

Key Takeaways

1.USD/BRL is projected to trade in a 4.50–4.80 range under a market-friendly election outcome that facilitates fiscal tightening, compressing the lingering ~5.3% fiscal risk premium.
2.In a negative fiscal scenario where idiosyncratic underperformance returns to peak December 2024 levels, USD/BRL could depreciate by 14% to around 5.80 (or 5.40 under a moderate fiscal premium).
3.Historical Brazilian elections (2014, 2018, 2022) show that sharp first-round FX reactions often reverse before the second round as market attention shifts rapidly toward cabinet selection and actual reform implementation.

Brazilian Real (BRL) — Navigating the Election
A High Real Rate and Wide Fiscal Deficit Backdrop
Lessons From Prior Elections: First-round FX moves can be large & focus shifts swiftly to execution soon thereafter
Benchmarking Potential BRL Moves: We see 4.50-4.80 as a plausible range for a market-friendly outcome, whereas 5.80 would be consistent with similar fiscal premium as in December 2024
TRADE IDEAS: Best Trade Ideas Across Assets

Report data

Exhibit 5: USD/BRL embedded a 19% unexplained ‘residual’ in December 2024, whereas this is closer to 5% now — as of September 22, 2026.

Metric	Estimate	Context
Brazil Nominal Fiscal Deficit	9.0 % of GDP	Nominal fiscal deficit reached its widest level in the last 25 years.
Brazil Primary Fiscal Deficit	0.7 % of GDP	Current primary deficit is well below the 2-3% surplus estimated necessary to stabilize debt dynamics.
Nominal FX Carry Level	7.0%	Current nominal carry levels are comparable to those seen ahead of the 2022 election cycle.
Cyclical Model Residual Risk Premium	5.3%	Unexplained underperformance residual relative to model-predicted returns, down from ~19% in mid-December 2024.
USD/BRL Fair Value Target Range (Market-Friendly Outcome)	4.50 - 4.80 USD/BRL	Estimated range under a market-friendly election outcome with fiscal tightening, where 4.80 aligns with GSDEER/GSFEER fair value.