Itaú Lifts Year-End USD/BRL Forecast to R$5.30 on Stronger Global USD and Terms of Trade Pressure

Itaú, one of Brazil's largest financial institutions, has revised its year-end foreign exchange forecast for the US Dollar against the Brazilian Real, projecting a weaker Real outlook driven by structural shifts in global finance and trade. The bank raised its 2026 year-end USD/BRL forecast to R$5.30, up from a previous R$5.15, marking a significant adjustment that signals potential headwinds for the local currency. As of today, the USD/BRL pair is trading at 5.091851.

The rationale behind the upward revision centers on two primary, reinforcing macro factors that are expected to dampen the Real's performance. First, Itaú anticipates a stronger global USD environment due to the expectation of US interest rates remaining higher for longer. A persistent hawkish stance from the US Federal Reserve shrinks the interest rate differential between the Selic rate and the Fed Funds Rate, thereby chipping away at the high carry trade appeal that has long underpinned demand for the Brazilian Real. This shift narrows the advantage for global investors allocating capital into Brazilian fixed income assets.

The second, and more structural, driver is a worsening of Brazil's terms of trade. The bank’s analysis points to a projected drop in key commodity prices, which directly impacts Brazil's trade balance and reduces the flow of dollars into the economy. Brazil is a major exporter of commodities, and any sustained decline in prices for goods like iron ore and soybeans lessens the country's dollar-earning power. This deteriorating trade outlook combines with a strong global USD to create sustained pressure for the currency to depreciate. This long-term view is further evidenced by the bank’s revision of its 2027 year-end forecast, which was lifted from R$5.35 to R$5.50.

For investors tracking Brazilian assets, including the Brazil ETF (EWZ), the revision is a material signal that external factors are beginning to outweigh domestic policy appeal. The adjustment suggests that the structural forces of a dominant US dollar and commodity price pressure could undermine the Real's stability, making it difficult for the currency to maintain its recent strength below the R$5.10 level.

To determine the trajectory of the Real in the second half of the year, investors will be closely watching upcoming data and statements from two key areas: US economic prints, which will influence the Federal Reserve's rate path and the global USD’s strength; and commodity market performance, particularly the price action in the major agricultural and mining sectors that dictate Brazil’s dollar inflows. A sharp fall in commodity prices combined with continued US economic resilience would further validate Itaú’s updated, more cautious outlook.