Brazil political events to continue to drive price action

The inaction of the government continues to take its toll on Brazilian Assets. Any meaningful change is not expected in the following week.

As such, risk premia is expected to remain elevated until there is more clarity on how the fiscal situation is going to be addressed. Markets will pay attention to rating agencies, waiting for Moody's and Fitch to follow S&P's move at some point, something that is already priced in CDS. 

"USD/BRL is expected to reach our forecast (4.00) in the months to come as things probably will need to deteriorate further until the political will aligns between different parties", says Barclays.