ING analyst Chris Turner says Brazilian assets are set to rally after Sunday's presidential vote, in which Flavio Bolsonaro took 47% of the popular vote against President Lula's 45%. The two will meet in a run-off on 25 October, and Turner expects markets to assume the remaining 8% of the vote leans toward the Bolsonaro camp, with investors having anticipated a much tighter first round. He argues that Bolsonaro's platform of fiscal austerity and deregulation should lift both the currency and the bond market, though he notes the stronger dollar and surging US Treasury yields make the external backdrop tougher for emerging market currencies than earlier this year. Turner projects USD/BRL could open near 5.10, but says a move back to the year's lows at 4.90 looks too aggressive right now.
Bolsonaro's strong first-round showing and fiscal-austerity platform are expected to lift the Brazilian real, with USD/BRL seen near 5.10.
