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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 38 institutional desks. No promotion.
The desk sees Brazilian assets poised for a significant rally following Flávio Bolsonaro's unexpected lead in the presidential election, with the potential for a substantial re-rating of Brazilian assets due to expected fiscal consolidation and deregulation. Per the full note from ING, the USD/BRL may test the 4.90 level in the coming months, especially with anticipated cuts in the policy rate by up to 150 basis points should Bolsonaro secure the presidency outright. Meanwhile, the Mexican peso faces pressure as Banxico appears unlikely to align its monetary policy closely with the Fed's tightening movements, leaving the peso vulnerable and the USD/MXN in a precarious position. This divergence in monetary policy continues to shape perspectives on BRL/MXN, which the desk believes will trend higher amidst these developments.
The desk argues that Brazilian assets are on the brink of a positive shift, particularly in the context of a potential Bolsonaro presidency. The source notes that the outcome of the initial election round could lead to further investment inflows if Bolsonaro's policies signal fiscal discipline and deregulation, potentially allowing USD/BRL to reach new lows around 4.90 in the next few months.
Supporting this view, ING's analysis hints at an expected 150 basis point cut in Brazil's policy rate, which would invigorate investment sentiment. Conversely, the Mexican peso is under pressure, exacerbated by Banxico's reluctance to mirror the Federal Reserve's rate hikes, maintaining a narrow interest rate differential that could keep the peso under strain.
Currently, the market consensus targets for USD/BRL align around 4.75 by year-end, with various firms projecting: - rabobank: 4.80 - socgen: 4.75 - rbc: 4.75
This stance is somewhat aggressive compared to our overall perspective but fits into the lower range of projections presented. Notably, the desk's bearish outlook for USD/BRL at 4.90 sits below these consensus levels, indicating a divergence in expectations from the broader market consensus.
Aligning with the desk's perspective, several firms anticipate a more favorable outlook for BRL assets post-election, while others continue to express skepticism over the peso's outlook. goldman and bofa are among those taking a cautious view, emphasizing potential volatility in the peso against a backdrop of minimal action from Banxico. Other critical pairs to monitor include EUR/USD and GBP/USD, given their interplay with broader dollar dynamics, influencing liquidity and investor sentiment in the LATAM FX space.
How firms align with this view
Key takeaways
Market implications
Traders should look closely at the 4.90 level for USD/BRL as a critical support point. Should Bolsonaro win the presidency convincingly, we may witness further currency movements favoring the Brazilian real, while continued weakness in USD/MXN may indicate questions over the peso's stability.
Risks to this view
Should Bolsonaro fail to secure a clear majority in the upcoming run-off or if his policy proposals do not inspire confidence, we could see a rapid reversal in the current bullish outlook for BRL. Additionally, any unexpected tightening by Banxico could bolster the peso unexpectedly.
| Firm | Stance | YE 2026 |
|---|---|---|
Goldman Sachs | Bearish | 1.1200 |
UOB | Bearish | 1.1140 |
ABN AMRO | Bullish | 1.1500 |
All 28 desk targets for EUR/USD
Articles Latam FX Talking: Brazil and Mexico on diverging paths Published 11:45 FX Talking Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Flávio Bolsonaro's surprising success in the first round of Brazil's presidential elections suggests Brazilian assets and the currency remain prone to a re-rating. In contrast, Banxico seems to have little intention of tracking the Fed in its tightening cycle, leaving the peso quite vulnerable. BRL/MXN looks set to continue its powerful advance Chris Turner Brazilian assets are in the midst of a re-rating, while Banxico is showing benign neglect for the peso USD/BRL: The presidency is Bolsonaro’s to lose Spot One month bias 1M 3M 6M 12M USD/BRL 4.9873 Mildly Bearish 4.95 4.80 4.75 4.75 The first-round result in the presidential election proved quite the surprise, where Flavio Bolsonaro secured a two-point lead over incumbent President Lula da Silva.
The run-off on 25 October is expected to see the other candidates’ votes directed very much to Bolsonaro. The presidency now seems Bolsonaro’s to lose. A Bolsonaro victory later this month could see another round of Brazilian asset buying on expectations that fiscal consolidation (perhaps 2% of GDP) and deregulation can prompt a re-rating of the Brazil investment thesis.
The policy rate could be cut 150bp. Despite a tough external environment, we see scope for USD/BRL to test the lows of the year at 4.90 and break lower next year. Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/MXN: Benign neglect of the peso Spot One month bias 1M 3M 6M 12M USD/MXN 18.40 Neutral 18.25 18.25 18.00 17.75 USD/MXN has surged 7-8%, largely because the Fed has hiked, US Treasury yields have surged and Banxico did not feel the need to match the Fed’s move.
Indeed, Banxico said it does not have to ‘mechanically’ react to actual or expected Fed policy. This leaves the Banxico-Fed spread at the tightest levels (250bp) seen over the last quarter of a century. The peso is now exposed.
EM correlations show Mexican local currency debt as some of the most exposed to higher Treasury yields. It seems too early to call a top in US rates, meaning that USD/MXN could trade 18.50. Uncertainty around the United States-Mexico-Canada Agreement and US President Donald Trump returning to trade post-midterm election results can see MXN underperform.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts USD/CLP: Higher US rates, lower copper production weigh Spot One month bias 1M 3M 6M 12M USD/CLP 976.86 Neutral 975.00 975.00 975.00 925.00 Latam currencies had a tough September, and Chile’s peso was no exception. Not only are higher US rates weighing on the peso, but so too are Chile’s challenges with copper production. Bad weather has been playing a part here, but there are now reports of labour market strikes starting too.
As such, Chile may not be able to take advantage of high copper prices. The central bank has the policy rate at 4.50%. In the past, it had wanted to cut rates further, but that window has now shut.
Markets are expecting 100bp of hikes now over the next year. USD/CLP could get close to the top of a 900-1000 range over the next three to six months. And we look for USD/CLP to turn lower in 2Q27.
Source: Refinitiv, ING Forecasts "> Source: Refinitiv, ING Forecasts FX Talking Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Chris Turner Global Head of Markets and Regional Head of Research for UK & CEE Chris is Global Head of Markets and Regional Head of Research for UK & CEE.
Together with his team, he provides short and medium-term FX recommendations for ING's corporate and…
How we cover this story
Persistent EUR/USD bearish flows into year-end suggest technical breakdown risk if support levels fail to hold.
Technical breakdown below key EUR/USD support at 1.1145 signals potential continuation of euro weakness in near-term trading ranges.
De-escalation in energy supplies reduces euro-zone recession risk premium, supporting EUR/USD upside near-term.
EUR/USD spot sits 3.42% below the 31-firm median Dec-26 target of 1.16, with a 0.155 range separating the most bullish and bearish desks.
EUR/USD spot trades 3.43% below the 31-firm median Dec-26 target of 1.16, leaving consensus firmly bullish while the tape lags.
USD/JPY trades 2.80% above the 24-firm median Dec-26 target of 154.0, with a 25.5-point dispersion range signalling deep disagreement on the BoJ-Fed spread path.
28 investment banks see EUR/USD at 1.1563 by Dec 2026
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