Brazil Markets Stabilize Ahead of Fed and Copom After Flávio Bolsonaro Shock

Overview

• Senator Flávio Bolsonaro said his presidential pre-candidacy is “irreversible,” which on Tuesday drove the real weaker, pushed long-term DI rates higher and knocked Ibovespa futures.
• Local stress eased later as the Chamber approved the dosimetry bill that reduces penalties for January 8 convicts, a move seen as changing political bargaining and helping pull the dollar off intraday highs near R$5.50 to a R$5.436 close.
• On Wednesday morning, investors were cautious but the real steadied as attention turned to the day’s decisions from the Fed and Brazil’s Copom, with markets broadly expecting a 25 bp Fed cut and a Selic hold at 15%.
• Brazil’s November IPCA rose 0.18% on the month and 4.46% year over year, slightly softer than forecasts, reinforcing the focus on central-bank guidance for the start of possible rate cuts in 2026.
• Stronger U.S. JOLTS data showing roughly 7.7 million job openings lifted Treasury yields and the dollar index on Tuesday, while China’s trade data highlighted a record annual surplus of about US$1.07 trillion.