Brazil: Real Extends Losses on Fiscal Concerns.

The Brazilian real weakened to over 5.65 per USD in November, extending its lowest since since May of last year, as the government’s fiscal adjustment bill disappointed markets. Markets had previously welcomed the news as an initial step toward a more robust fiscal agenda, but now view the bill as a timid adjustment. The measures are understood not to focus on structural adjustments to reverse the growing public debt trajectory, but rather on opening more room for spending freezes to reach the 0.5% of GDP surplus target for 2027. The government has faced market pressure to announce fiscal adjustments after Brazilian assets plunged following President Lula’s reelection. Meanwhile, annual inflation rose to 4.63% in October from 4.58% in September, below market expectations of 4.74% but marking a four-month high and remaining above the BCB’s 4.5% target ceiling. With inflation still above target, the central bank is expected to remain cautious about resuming its Selic easing cycle.