Brazi: President-elect Lula is sending all the wrong signals – BBH

Brasilian President-elect Lula is likely to be less orthodox than what Lula was during his two-term presidency between 2003 and 2011, according to analysts from Brown Brother Harriman. They point out USDBRL coudl rise to 5.7240, it if breaks above 5.52.  

Key Quotes: 

“Reports suggest he favors leftist Fernando Haddad for Finance Minister.  While no final decision has been made, unnamed sources say the former mayor of Sao Paulo is the front-runner.  If so, it would be a bad signal as markets were hoping  for a more orthodox choice with market experience and credibility.  To make matters worse, Lula said the government needs to start talking about “social responsibility rather than fiscal responsibility.”  Reports suggest Lula is unlikely to announce any members of his cabinet until early December, after he returns from planned trips to Egypt and Portugal.”

“Lula 2.0 is likely to be less orthodox than Lula 1.0.”

“USD/BRL tested the July high near 5.5140 and a break above would target the January high near 5.7240.”