UBS BB cuts exchange rate forecasts, sees firmer real on US easing and Brazil’s rates

Brazil’s Q2 GDP expected to grow 0.3% quarter-on-quarter, sharply slower than Q1’s 1.4%. [https://invezz.com/wp-content/uploads/2025/06/brazil-cenabnk-invezz.png] UBS BB revised its exchange rate forecasts and argues that the scenario is more positive for the Brazilian real as global monetary easing progresses, while Brazil continues to offer high domestic interest rates. The bank also sees a fair value of R$5.40 per US dollar at the end of 2025 and the end of 2026, which is higher than the actual spot rate but lower than its earlier forecasts of R$5.80 in 2025 and R$5.86 in 2026. Overall, the revision implies more positive bias for local assets on external conditions and given the domestic monetary bias in Brazil. STRUCTURAL VARIABLES BEHIND THE FORECAST UBS BB’s fair value model includes a number of structural macroeconomic and financial elements. These include the current account balance and net external liabilities as a percentage of GDP, external commodity prices as measured by the CRB index, and the performance of an emerging market currency basket. The bank also considers nominal interest rate differentials between Brazil and advanced countries, as well as…