"CPI in Focus as Bonds Rally, Real Steadies"

RoboMacro ResearchAlso todaySee the US Macro Daily

"CPI in Focus as Bonds Rally, Real Steadies"

49.20 S&P Global Services PMI7,740m Trade Balance

Bovespa206,220.00+0.94%

USD/BRL5.01-0.16%

EUR/BRL5.63+0.17%

Vale13.42-1.40%

Market Snapshot

Asset	Level	Change
Bovespa	206,220.00	+0.94%
USD/BRL	5.01	-0.16%
EUR/BRL	5.63	+0.17%
Vale	13.42	-1.40%
Petrobras	24.69	+2.92%
WTI Crude	90.35	-1.25%
Gold	4,211.30	+1.31%
Bitcoin	82,474.91	+0.98%
Brazil 5Y Govt Yield	12.68%	-23 bp
Brazil 10Y Govt Yield	12.79%	-21 bp

Prior Economic Events

Data	Prior	Cons	Actual
S&P Global Services PMI	50.50	-	49.20
Trade Balance	7,390m	7,190m	7,740m

Today's Economic Events

Data	Prior	Cons	Time
Inflation Rate Month-over-Month	-0.32	0.73	08:00
Inflation Rate Year-over-Year	4.22	4.50	08:00

Brazil's 5-year yield eased 23 bp to 12.68% and the 10-year fell 21 bp to 12.79% as rate-cut conviction builds ahead of today's September IPCA print.
September trade balance surprised to the upside at $7.74bn versus $7.19bn expected, while the services PMI slipped back into contraction at 49.2.
Petrobras gained 2.92% after R$3.5bn in oil auction awards, lifting the Bovespa 0.94% to 206,220 despite Vale's 1.40% decline.

Yesterday's Recap

Brazilian fixed income led Tuesday's charge, with the 5-year government yield falling 23 bp to 12.68% and the 10-year easing 21 bp to 12.79% as traders positioned for a continued easing cycle from the Banco Central do Brasil. The real firmed modestly, with USD/BRL slipping 0.16% to 5.01, while EUR/BRL edged up 0.17% to 5.63 on euro-area softness. Equities were more mixed: the Bovespa advanced 0.94% to 206,220, powered by a 2.92% surge in Petrobras after the government raised R$3.5bn in oil auctions led by the state champion.

Vale lagged, shedding 1.40% to 13.42 as iron ore sentiment stayed cautious. On the data front, September's trade balance delivered a $7.74bn surplus, comfortably beating the $7.19bn consensus and underscoring the strength of the external accounts. The S&P Global services PMI, released earlier in the week, printed 49.2, down from 50.5 and back below the 50 expansion threshold — a reminder that domestic demand is cooling under restrictive policy.

Elsewhere in the complex, WTI crude fell 1.25% to $90.35 and gold rallied 1.31% to $4,211, while Bitcoin added 0.98% to $82,475.

The Day Ahead

Today's centerpiece is the September IPCA consumer price release at 08:00 local time, with both the monthly and annual readings due simultaneously. The headline month-over-month figure is expected at 0.73% after August's seasonally negative 0.32% print, while the year-over-year rate is seen accelerating to 4.50% from 4.22%. A softer-than-expected outcome would reinforce the market's growing conviction in near-term Copom cuts and likely extend the bond rally that gathered pace Tuesday.

Conversely, a hot print — particularly in services or food-at-home components — could force a reassessment of the easing path and pressure the real. With no other Brazilian releases on the calendar today, attention will shift to how the IPCA interacts with the fiscal narrative heading into year-end. Tomorrow's calendar is currently empty, leaving the CPI as the week's final domestic catalyst before attention turns to the October Copom meeting cycle.

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Other Economic Notes

The R$3.5bn raised in this week's oil auctions, led by Petrobras, offers a welcome boost to the 2026 financing picture and signals continued momentum in the pre-sal concession pipeline. On the trade front, September's $7.74bn surplus keeps the current account on a supportive trajectory, though the composition matters: strength is concentrated in commodities where prices, not volumes, dominate. Meanwhile, the return of the services PMI to contraction at 49.2 validates the view that 13.75% policy rates are biting on domestic activity.

Political noise is also building, with Flávio Bolsonaro's strong first-round showing reshaping market expectations for the runoff and prompting hedge funds to add to winning positions.

Global Macro News

Global risk appetite was constructive but choppy. Oil's 1.25% retreat to $90.35 matters for Brazil's terms of trade and Petrobras' realized prices, though the auction news provided a company-specific offset. Gold's push to $4,211 reflects persistent safe-haven demand amid fiscal questions in Europe, where the euro's weakness — the "French problem" per Morningstar — has implications for EUR/BRL crosses and Brazilian export competitiveness.

In Asia, Chinese auto import dynamics are raising job-protection concerns in Brazil's industrial belt, a friction point that could feature in trade policy. Currency markets were mixed, with the Korean won firming while EM peers watched the dollar's trajectory into the Brazilian CPI print.

Continuation

BCB Watch

The Copom's next moves dominate the domestic narrative, with the Selic at 13.75% and the bond market pricing meaningful easing through mid-2027. Tuesday's 21-23 bp rally in nominal yields suggests the market sees room for the bank to accelerate cuts if today's IPCA cooperates. The key tension: with headline inflation at 4.22% year-over-year — above the 3% target midpoint — the bank has scope to ease, but services inflation and the fiscal outlook complicate the glide path.

The strong trade surplus and stable real at 5.01 give the Copom comfort that imported inflation is contained, supporting the case for a measured easing cycle rather than a rapid sprint. Watch the composition of today's print: a benign core would cement expectations for continued cuts at the next meeting, while any upside surprise in the 4.50% consensus direction could see the curve reprice. The bank's communication has emphasized data dependence, and today's CPI is precisely the data on which the December decision will hinge.

Brazil Macro Daily(Beta Mode)