Latin American inflation concerns their currencies

In Brazil, after the rise in the Selic target by another 50 bps to 13.25% in April, we expect the Copom (MPC of Brazil) proceedings to shed more light on how much tightening is left in the cycle.

It is forecasted that Brazil would be Latin America's biggest economy and would contract by at least 1% this year following a sluggish 0.1% expansion in 2014.

In Brazil, full-month IPCA inflation in April is likely to have accelerated to 8.4% YoY driven by ongoing adjustments to the regulated prices of petrol and energy.

On the other hand, in Chile, we expect inflation to fall from 0.6% YoY in March to 0.4% YoY in April.

The Mexico's consumer confidence index in April is likely to recover modestly.

But among the lots we think BRL against US dollar has upper hands.

Technical and Derivatives watch:

On technical charts of USDBRL pair, we don't see any threats for BRL's recovery in near month as there is slight sign of recovery confirmed by RSI (14) showing downward convergence to the price curve. Apart from this we don't see anything much happening on this pair.

On a short term basis we recommend to short futures contracts on this currency cross. The contracts should be of near month.