USDBRL: Booming Trade Balance

UBS has revised its USDBRL forecasts downward, projecting the currency to reach 4.80 in 2Q26, supported by a booming trade surplus and resilient FDI. Despite high domestic fiscal risks and a 25bps Selic cut, the BRL remains a top emerging market performer with a high carry-to-vol ratio.

Key Takeaways

• 1.UBS has lowered its USDBRL targets to 4.80 for 2Q26 and 5.20 for 1Q27, citing a strong trade balance and favorable carry-to-vol ratios.
• 2.Brazil's external account remains robust with a USD 10.5bn trade surplus in April and high FDI covering the current account gap.
• 3.The Central Bank of Brazil (Copom) continues its easing cycle, cutting the Selic rate by 25bps to 14.50%.

Table of Contents

• Key drivers
• CIO Forecast- USDBRL
• Fundamental influence
• Politics
• Economic outlook
• External balance
• Monetary policy
• Fiscal outlook
• Risks to our view
• Factors to watch
• Appendix

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