Monday, 26 January 2009

Important Economic Releases Out This Week in Brazil Will Tell Us About Extent of Economic Downturn

This week, the central bank will release current account figures and budget data for the month of January and December respectively (click on the link for the central bank's Web page.) The trade deficit will probably come narrower than expected by most economists, as imports are declining fast. And budget numbers will likely show a decline in tax collections plus the impact of rising spending earmarks to fight the crisis.

The data will probably impact the currency markets. The currency, said one trader who wanted to remain anonymous, will probably suffer from high volatility. The recession that is afflicting the U.S., some European countries and Japan, which together buy almost half of Brazil’s exports, is hurting exports. The plunge in commodities will also hurt dollar inflows. The real has also been taken hostage by fluctuations in global sentiment, said the trader. A deterioration in fiscal numbers may also put more pressure on the currency -- Brazil is still the biggest debtor in Latin America.

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