UBS Recommends Buying Brazilian Real After Election Results
UBS advises buying the Brazilian real as Senator Flávio Bolsonaro leads President Luiz Inácio Lula da Silva in the first round of presidential elections.
Investment bank UBS identified a trading opportunity to buy the Brazilian real against the US dollar following the first round of presidential elections in Brazil. Senator Flávio Bolsonaro currently leads President Luiz Inácio Lula da Silva with 47.1% of the vote compared to 45.0%, a result that necessitates a runoff election on October 25.
UBS views these results, combined with gains by right and center-right parties in congressional elections, as signals of a shift toward more market-friendly policies. The bank set a target of 4.75 for USD/BRL, suggesting that a second-round victory for market-friendly candidates could strengthen fiscal consolidation and trigger a broader revaluation of Brazilian assets.
Potential risks to this outlook include a less market-friendly runoff result, deteriorating global risk sentiment, and rising US long-term yields.
