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The year has barely begun and it is already full of excitement. Events such as the imposition of additional tariffs on meat exports from several countries (including Brazil) to China, the conflict between the US and Venezuela, and institutional noise in Brazil have all contributed to increased risk aversion in the foreign exchange market. Despite this, our exchange rate has performed well over the last few days, most likely due to our attractive interest rate differential, as the majority expectation is that the Central Bank will maintain the Selic rate at 15% p.a. in its first decision of 2026, while the Fed may make an additional cut, further improving our famous carry trade!

Speaking of the Central Bank and interest rates, our curve continues to price in high, double-digit rates for relevant time horizons. Although the December IPCA came in line with market expectations, the Central Bank is still signaling a cautious approach due to the uncertainties surrounding 2026, particularly regarding Brazil's political and fiscal environment.


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