Analysts at TD Securities explained that they think the market is trading the “impeachment-good / no impeachment-bad” dynamic with too much certainty, and are missing subtle political dynamics that could lead to negative outcomes even in the pro-impeachment case.
Key Quotes:
“We provide two potential outcomes for the complex and highly unpredictable political process, neither of which are overly bullish BRL in the near term.”
“Impeachment may be the better of these two scenarios, but don’t expect a slam-dunk fiscal reform to immediately follow, as we’d fade any BRL rally on the assumption that the Temer administration may be short-lived.”
“The Rousseff/Lula government may, if sustained, lead to an outcome less disastrous than face value suggests, but this is highly dependent on fiscal measures and potential reforms.”
(Market News Provided by FXstreet)
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