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Bored by the Stormy nature of US politics? Well get ready for the Brazil Presidential elections in October. The leader in the polls is a former President that may be in prison. Donald Trump and Hilary Clinton you have nothing on former President Luiz InĂ¡cio Lula da Silva.

Lula Brazil

Lula on a Wing and a Prayer

Lula has a clear lead in the opinion polls, never mind that he is chillin' in the Big House on account of being convicted of corruption last year and on  Monday the second application for appeal was rejected. Logic suggests that da Silva's days as a free man are numbered and he will be in prison in the coming weeks. Despite this his Workers' Party has so far insisted that da Silva is their candidate, publicly mocking the idea of a Plan B.

While he can still take his appeal furtherbut  the likelihood of him standing in the elections in October seems slim to none. Looking towards the other candidates, it is a big unknown because of what is going on with Lula.

There has been a push in the financial press for the Minister of Finance Henrique Meirelles  to stand as a candidate, he has said he make a decision next week.  In what seems like a comedy of sorts the talk is the unlovable acting President Michel Temer is considering a further term in office.

Both these candidates seem doomed as they are faces of the unpopular reforms of the past years. Temer said also he has no interest, but this is Brazilian politics.

The best bet is a slew of populist candidates as they find some support amongst the electorate. That is the trend with Brexit, Trump, Europe to name a few. 

What is interesting all this uncertainty about the political future of Brazil is not putting pressure on the Brazilian Real $BRL right now, my suspicion is the absurdity of it all has lulled traders asleep on that end. This suggests the positive market sentiment through oil and risk on coupled with credible monetary policy are supporting BRL.

USDBRL Weekly 3 28 18

It is therefore the Banque de Brasil that would need to alter conditions to change the BRL, though a risk off scenario would hit it also. Thus far a continuation of the sideways move in $USDBRL with the risk to the upside. The clear pennant on the Weekly since the correction off the weakness since the GFC in 2008 will need to break to give a substantial move.

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