Brazil’s twin deficit indicates that woes are not over for Brazilian economy.
- Chart shows that Brazil’s primary surplus hovering near record lows. Even during 2008 financial crisis Brazil was able to manage primary surplus in positive territory, however that deteriorated since last year. Chart courtesy soberlook.com
- Current struggle between government and union suggests that it would be hard for the government to shore up enough austerity measures to tackle deficit, while growth remains lacklustre.
April’s PMI report from Markit economics show that downturn is far from over.
- HSBC PMI for April reached 43 month low, with contraction gathering further pace. Weaker Real has so far failed to boost exports. Higher inflation, austerity and economic stagnation keeping domestic demand low.
Real is trading around 3.06 level after bouncing from 2.88 area. Weaker dollar and rate hikes by Brazilian central bank has kept real in check last time. Real failed to advance last time 3.31.
Weaker economy would push Real further lower, however it is best to short Real against a basket of currencies (EUR, GBP, CAD, JPY, USD, AUD) to reduce the risk of dollar weakness.
The material has been provided by InstaForex Company – www.instaforex.com