Congress is in recess until February, giving Brazilian assets a temporary break from the political turmoil, as there will be no further progress in President Rousseff's impeachment process, House Speaker Cunha's corruption investigation, or fiscal reform measures. Last week, Congress approved a primary surplus target of 0.5% of GDP, below the level proposed by Finance Minister Joachim Levy, who left his post as a result. 

The government appointed former Planning Minister Nelson Barbosa as the new finance minister. Markets might react negatively, as Mr. Barbosa is not seen as fiscally conservative and business friendly as Levy. The heightened uncertainty about the fiscal consolidation and no progress on the political front amid a deepening recession will likely continue to weigh on the BRL. USDBRL is expected to reach 4.0 by year-end and 4.5 in 2016.

In terms of data, the most important release will be the Quarterly inflation report on December 23. It will provide updated forecasts by the central bank and might offer some guidance on the future path of monetary policy. Relatively to the previous report, more deterioration is expected in the inflation forecasts by the BCB, given the upward trajectory of inflation expectations and the incorporation of worse fiscal assumptions. 

"We expect no increase in the Selic rate in the months to come, although the market is pricing a very aggressive tightening aimed at containing inflation expectations, regardless of the recession", says Barclays.