Pound to Brazilian Real (GBP/BRL) Exchange Rate Volatile as Geo-Political Tensions Escalate
The British Pound (GBP) was trading down against the Brazilian Real (BRL) in the currency market on Wednesday following a disappointing performance from UK economic figures.
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The Pound has experienced session highs of 3.8636 versus lows of 3.8281, showing the exchange rate tapering down slightly in the last five days, despite the Brazilian currency being volatile in the currency market.
The Real however has fallen amid geopolitical tensions escalating further, causing a basket of majors to remain volatile as investors seek safe haven currencies.
Economist Silvio Campos Neto stated: ‘The Real is usually one of the currencies that is more affected by geopolitical concern.’
Brazil has been subject to rumours of stagflation, where the country in question experiences a period of stagnation and inflation where the economy fails to grow but the prices do.
The Central Bank of Brazil Chief Alexandre Tombini commented: ‘We certainly cannot speak of a crisis. I want inflation to be lower than it is now, but it remains under control.’
Tombini continued: ‘Maintaining monetary conditions, that is, taking into account a strategy that doesn’t contemplate a reduction of the monetary policy tool, inflation should enter a trajectory of convergence toward the target in the final semesters of the outlook horizon.’
Conversely the Pound is experiencing a period of limbo, awaiting the Bank of England’s (BoE) eagerly anticipated Interest Rate Decision occurring on Thursday.
Some economists have speculated that the Bank of England will be pressured to raise UK interest rates following economic indicators by way of data releases that suggest the economy could hold its ground following a rate hike.
Wednesday saw UK Industrial Production figures reach only 1.2% in June year-on-year, despite forecasts of 1.5%. Furthermore, to add to the disappointment, the UK only reached 1.9% in Manufacturing Production unable to attain the forecast 2.1%.
Economist Alan Clarke commented: ‘The last couple of months do hint at some cooling off in the near-term momentum.’
Furthermore the Pound has weakened due to poor UK Gross Domestic Product figures on Wednesday, reaching only 0.6%.
For now the Pound will remain volatile in currency pairings in anticipation of the BoE interest rate rises; however, the Real is also subject to uncertainty as political tensions escalate with Russia placing troops on the Ukraine border.
A NATO representative has stated: ‘We’re not going to guess what’s on Russia’s mind, but we can see what Russia is doing on the ground—and that is of great concern. Russia has amassed around 20,000 combat-ready troops on Ukraine’s eastern border.’
The BRL to GBP exchange rate is currently trending at 0.2598.