Copom Day 1 — Focus Survey Kills the 50 bps Cut
Today’s Brazil morning call lands on Copom Day 1 — the committee begins deliberations this afternoon with tomorrow’s decision looming as the most uncertain in years. This is part of The Rio Times’ daily Brazil Financial Morning Call, covering Latin American financial markets. Monday’s Focus Survey delivered the verdict the market feared: IPCA 2026 expectations jumped from 3.91% to 4.10% and the Selic endpoint rose from 12.13% to 12.25%. The 50 bps cut is dead. The debate has narrowed to 25 bps vs hold — and the market is pricing 25 bps to 14.75% as the base case.
But the Ibovespa rallied anyway. The index surged 1.25% to 179,875, bouncing off the 200-day SMA zone after oil pulled back sharply. Trump’s statement that “Iran wants a deal but I’m not ready” plus his call for allies to send warships to Hormuz gave markets a de-escalation signal. Brent dropped 2.8% but still settled above $100 for a third straight session (~$100.25). WTI fell to $93.50. The real strengthened 1.6% to R$5.229 as the Tesouro intervened in the DI curve, pulling long-end rates lower. US equities bounced: S&P 500 +1.01% to 6,699, Nasdaq +1.22%, Dow +0.83%. The 10Y Treasury yield fell 6.5 bps to 4.22% on the risk-on rotation.
The war escalated in a new direction: a drone strike hit the Shah natural gas field in the UAE — dragging a third country’s energy infrastructure into the conflict. If this becomes a pattern, the war premium returns with force regardless of Hormuz diplomacy. The FOMC also begins today (decision Wednesday 14:00 ET), with a hold universally expected but the statement’s tone on oil and growth critical. Nvidia’s GTC keynote is tonight. Germany’s ZEW sentiment at 06:00 ET is the European macro read. War Day 18 — Copom T−1.
Three Things That Matter
| Monday | Ibovespa +1.25% to 179,875 (bounced off 200-day SMA). USD/BRL −1.6% to R$5.229 (Tesouro DI intervention). S&P 500 +1.01% to 6,699. Brent −2.8% to ~$100.25 (3rd straight close above $100). WTI $93.50. 10Y −6.5 bps to 4.22%. Focus Survey: IPCA 4.10% (from 3.91%), Selic 12.25% (from 12.13%). IBC-Br +0.78% (est +0.85%). US IP +0.2% (est +0.1%). Empire State Mfg −0.2 (est 3.9 — miss). NAHB Housing 38 (est 37 — beat) |
| War | Day 18 — Drone strike hit Shah gas field in UAE (new front). Trump: “Iran wants a deal, I’m not ready.” Called for allied warships in Hormuz. Trump-China trip may be delayed over war focus. Iran approved 2 Indian LPG tankers (selective opening). Brent trading range exploded: $99.85–$106.50 on Monday alone |
| Today | Copom begins (decision tomorrow after close). FOMC begins (decision tomorrow 14:00 ET). German ZEW (06:00 ET, cons: 39.0/prev: 58.3). IGP-10 (07:00 BRT). Pending Home Sales (10:00 ET, cons: −0.6%). 20Y Bond Auction (13:00 ET). ECB Lagarde speaks (14:00 ET). API Oil Inventories (16:30 ET). Nvidia GTC keynote tonight |
Where We Left Off MONDAY, MAR 16 — B3 CLOSE
The Ibovespa opened Monday at 177,656 (essentially Friday’s close) and rallied through the session, reaching a high of 181,255 — briefly reclaiming 181,000 — before settling at 179,875.44 (+1.25%). The move was driven by three catalysts: oil’s pullback from $103 opened a relief window; the Tesouro’s intervention in the DI curve brought long-end rates lower; and Trump’s comments that Iran “wants a deal” gave the broader risk complex a de-escalation narrative. Volume was healthy. The 200-day SMA at ~176,163 held as support — the index never tested it.
The real strengthened 1.6% to R$5.229 — its best session since the war began — as the combination of DI curve relief and a weaker dollar globally supported EM currencies. The USD/BRL had peaked near R$5.28 in the morning before the Tesouro’s action pulled it sharply lower. The Copom expectation for a 25 bps cut to 14.75% still represents strong carry, keeping the real attractive despite the war premium.
In New York, the S&P 500 rallied 1.01% to 6,699.38, recovering from Friday’s 2026 low. The Nasdaq led with +1.22% to 22,374 ahead of Nvidia’s GTC, and the Dow gained 0.83% to 46,946. The 10Y yield fell 6.5 bps to 4.22% — a meaningful rally in bonds that eased financial conditions. US Industrial Production came in slightly above expectations at +0.2% (cons: +0.1%), suggesting the real economy hasn’t cracked yet. However, the NY Empire State Manufacturing Index crashed to −0.2 (cons: 3.9, prev: 7.10) — a sharp miss that signals manufacturing contraction in the New York region. The NAHB Housing Market Index rose to 38 (cons: 37), a modest beat. Computer hardware and semiconductor stocks led the session.
The Focus Survey was the domestic headline: IPCA 2026 expectations jumped 19 bps to 4.10% — the first breach of 4% this year — while the Selic endpoint rose to 12.25%. The IBC-Br economic activity index came in at +0.78% for January (vs est +0.85%), showing the economy growing but below expectations. The combination formally closes the door on a 50 bps Copom cut.
Market Snapshot DATA AS OF MON, MAR 16 CLOSE
| Indicator | Close | Change |
|---|---|---|
| Ibovespa | 179,875 | +1.25% |
| USD/BRL | R$5.229 | −1.60% |
| S&P 500 | 6,699 | +1.01% |
| Nasdaq | 22,374 | +1.22% |
| 10Y Treasury | 4.22% | −6.5 bps |
| Gold (Spot) | ~$5,020 | −1.05% |
| Brent Crude | ~$100.25 | −2.80% |
| Iron Ore (62%) | ~$104 | −1.89% |
| DXY | ~99.40 | −0.64% |
What to Watch TUESDAY CATALYSTS
The Copom begins its two-day meeting today, with the decision tomorrow after the B3 close. The Focus Survey locked in the framework: IPCA 4.10%, Selic endpoint 12.25%. A 25 bps cut to 14.75% is the overwhelmingly expected outcome. The key risk is a hold — which would signal the BCB views the oil shock as structurally inflationary — or a hawkish surprise in the statement’s forward guidance that narrows the easing cycle.
The FOMC also begins today. A hold is certain, but the statement and dot plot will be critical. If the Fed acknowledges the oil-driven inflation risk by revising up its PCE forecast while simultaneously lowering GDP, it confirms the stagflation diagnosis the market is pricing. Any signal that rate cuts are off the table through June sends the dollar higher and pressures EM currencies.
The German ZEW Economic Sentiment (06:00 ET, cons: 39.0 vs prev: 58.3) is expected to show a sharp drop in investor confidence amid the oil shock and war. This matters for global risk appetite. Pending Home Sales (10:00 ET, cons: −0.6%) test the US housing market under rising rate pressure. The 20-Year Bond Auction (13:00 ET) gauges demand for long-duration Treasuries amid inflation fears. The API Oil Inventories (16:30 ET) provide the week’s first supply signal. ECB President Lagarde speaks at 14:00 ET. The IGP-10 inflation index (07:00 BRT) gives a high-frequency Brazilian inflation read.
Ibovespa Setup TECHNICAL LEVELS
The Ibovespa closed Monday at 179,875.44 (+1.25%), bouncing off the 200-day SMA zone. Daily RSI reads 45.58 (MA: 52.27) — recovering from Friday’s 41.23 but still below neutral. The MACD histogram remains deeply negative at −1,458 (MACD: −242.97, signal: 1,214.97), but the narrowing from Friday’s −1,604 is a constructive micro-signal. The 200-day SMA at ~176,163 held and is now 3,712 points below — a significantly wider cushion than Friday’s 1,662 points.
Resistance: 179,875 (Monday’s close) → 181,149 (50-day SMA cluster) → 181,255 (Monday’s high) → 181,815 (upper MA).
Support: 178,656 (intermediate MA) → 177,653 (Friday’s close) → 176,354 (lower SMA) → 176,163 (200-day SMA).
Tuesday is a low-conviction session: the market will wait for Wednesday’s dual central bank decisions. The index is stuck between the 200-day SMA at 176,163 (floor) and the 50-day SMA cluster at ~181,149 (ceiling). A break above 181,255 (Monday’s high) signals the market has priced in 25 bps and is looking past it. A break below 177,653 (Friday’s close) reopens the 200-day test. The Copom decision tomorrow is the binary event — positioning is likely to compress into a narrow range ahead of it. Bias: neutral, range-bound between 178,000–181,000.
Copom Watch MEETING: MAR 17-18 · DAY 1
The Selic sits at 15.00%. The Copom begins deliberations today, decides tomorrow. Monday’s Focus Survey settled the internal debate: IPCA 2026 expectations at 4.10% (breach of 4% ceiling) and Selic 12.25% formally kill the 50 bps cut. The 12-month trailing IPCA at 3.81% (below the 4.5% ceiling) gives the BCB cover to cut, but the rising expectations profile argues for caution.
The base case is 25 bps to 14.75%. This honors the January forward guidance to “initiate flexibilization” while acknowledging the deterioration in the macro picture since the guidance was issued. The statement’s forward guidance for the next meeting is more important than the cut itself. If the BCB signals further cuts are data-dependent with no pre-commitment, the DI curve extends. If it signals a 25 bps cadence with a shorter cycle, the curve flattens.
The hold scenario (5–10% probability) would be the hawkish surprise: the BCB arguing that $100+ Brent, the fiscal package, and 4.10% IPCA expectations justify delaying the cycle start. This would strengthen the real in the near term but crater the Ibovespa as the market reprices the entire easing narrative. The IBC-Br at +0.78% gives the BCB a mild argument that growth isn’t collapsing, reducing urgency to cut. The Tesouro’s DI intervention Monday was arguably a coordinated signal that the government wants the cut to proceed.
Economic Calendar TUESDAY, MAR 17
| Time | Event | Impact |
|---|---|---|
| All Day | Iran-US War Day 18 — Drone strike hit Shah gas field in UAE. Trump: “Iran wants a deal.” Allied warships requested for Hormuz. Copom Day 1. FOMC Day 1. Nvidia GTC. Copom T−1 | HIGH |
| 06:00 ET | German ZEW Economic Sentiment (Mar) — Cons: 39.0 (prev: 58.3). Current Conditions cons: −67.1 (prev: −65.9). Sharp drop expected as oil shock hits European confidence | MEDIUM |
| 07:00 BRT | Brazil IGP-10 Inflation (Mar MoM) — Prev: −0.4%. High-frequency wholesale/consumer price gauge. Will reflect early oil shock pass-through | MEDIUM |
| 10:00 ET | US Pending Home Sales (Feb MoM) — Cons: −0.6% (prev: −0.8%). Housing demand under rising-rate and oil-price pressure | LOW |
| 13:00 ET | US 20-Year Bond Auction — Prev: 4.664%. Tests demand for long-duration Treasuries amid inflation fears and $100+ oil | MEDIUM |
| 14:00 ET | ECB President Lagarde Speaks — Watch for signals on European monetary policy response to the oil shock | MEDIUM |
| 16:30 ET | API Weekly Crude Oil Inventories — Prev: −1.700M. First supply signal of the week. A large draw supports oil; a build suggests SPR release is working | MEDIUM |
| MAR 18 | Copom Decision (after B3 close) + FOMC Decision (14:00 ET). Double central bank day — the week’s binary event. BCB: 25 bps to 14.75% expected. Fed: hold expected, statement critical | HIGH |
Latin America Markets MONDAY CLOSE
| Index | Close | Change | RSI (14) | Signal |
|---|---|---|---|---|
| Ibovespa | 179,875 | +1.25% | 45.58 | Neutral |
| IPC (Mexico) | 65,649 | HOLIDAY | 34.39 | Oversold |
| COLCAP (Colombia) | 2,186 | +0.22% | 39.81 | OS Watch |
| IPSA (Chile) | 10,585 | +1.13% | 40.87 | Neutral |
| MERVAL (Argentina) | 2,606,351 | −1.37% | 37.18 | Oversold |
Monday saw the Ibovespa (+1.25%), COLCAP (+0.22%), and IPSA (+1.13%) post gains, while MERVAL (−1.37%) continued its slide and IPC did not trade (Mexico holiday). The Ibovespa and IPSA led the recovery, benefiting from oil’s pullback and the global risk-on rotation. The MERVAL stands out as the only major LatAm index that declined — Argentina’s budget surplus data pending and the broader EM selloff may have weighed. RSI readings improved modestly: Ibovespa 45.58 (from 41.23), IPSA 40.87 (from 41.01), COLCAP 39.81 (flat). MERVAL at 37.18 remains deeply oversold. IPC frozen at 34.39 (Friday’s deeply oversold reading) — Mexico returns to trade Tuesday.
The divergence between the Ibovespa’s bounce and the MERVAL’s continued decline reflects the Copom catalyst: Brazil has a potential rate cut tomorrow, while Argentina lacks a comparable near-term positive. The Shah gas field drone strike raises a new risk for the entire region — if the war spreads to UAE energy infrastructure, the oil price response could overwhelm any domestic catalyst. As covered in yesterday’s Morning Call, the 200-day SMA remains the structural floor for the Ibovespa.
Commodities & FX KEY MOVES
Brent settled Monday at ~$100.25 (−2.8%), the third consecutive close above $100. The session’s range was extraordinary: $99.85–$106.50, a nearly $7 intraday swing. The pullback was driven by Trump’s call for allied warships in Hormuz (suggesting a reopening effort), his statement that Iran “wants a deal,” and Treasury Secretary Bessent’s confirmation that the US is allowing Iranian oil tankers to transit the Strait. WTI fell to $93.50 (−5.3%). Despite the pullback, the $100 floor is holding — and the Shah gas field strike in the UAE adds a new dimension of supply risk. The IEA’s 400-million-barrel SPR release continues but has not yet broken the $100 floor.
Iron Ore fell further to ~$104 (−1.89%), its fifth consecutive decline. The demand outlook is deteriorating alongside global growth fears. China data remains the key driver — FDI data was pending Monday.
Gold continued lower to ~$5,020 (−1.05%) as the risk-on rotation and falling yields paradoxically weakened the safe-haven bid. Gold briefly dipped below $5,000 intraday before recovering, maintaining the $5,000 structural floor.
USD/BRL fell 1.6% to R$5.229 — the real’s best session since the war began. The move was driven by the Tesouro’s DI curve intervention, the global dollar weakness (DXY −0.50%), and continued carry attractiveness at 14.75–15.00% Selic. The real outperformed most EM peers. Wednesday’s Copom decision is the next directional catalyst: 25 bps to 14.75% is priced in, so the reaction depends on the statement’s forward guidance.
DXY fell 0.64% to ~99.40, reversing Friday’s gains as the risk-on rotation and lower oil prices weakened safe-haven demand for the dollar. The dollar remains near ten-month highs but Monday’s drop was the largest daily decline in two weeks.
Risk Map BULL vs BEAR
| Bull Case | Bear Case |
|---|---|
| Brent pulled back 2.8% and the market held $100 — price discovery is compressing — The intraday range ($99.85–$106.50) shows massive volatility but the settlement near $100 suggests the market is finding equilibrium. If allied warships restore partial Hormuz traffic, Brent breaks below $100 and the entire risk premium narrative unwinds. The IPSA (+1.13%) and Ibovespa (+1.25%) show LatAm is ready to rally on any de-escalation.
The Copom will cut 25 bps and signal a measured easing cycle — A 25 bps cut to 14.75% is fully priced, so the Ibovespa won’t sell off on the decision itself. If the BCB pairs the cut with language indicating 2–3 more 25 bps moves through year-end (to ~14.00%), rate-sensitives rally: banks, homebuilders, and retail re-rate on a clear easing trajectory. The Tesouro’s DI intervention + USD/BRL at R$5.23 signal coordinated policy support — The government is actively managing the curve ahead of the Copom, and the real’s 1.6% rally was the best EM performance of the day. This is a credible policy signal: the fiscal and monetary authorities are aligned on easing. US Industrial Production +0.2% shows the economy isn’t breaking yet — The real economy is bending but not cracking. If the FOMC signals patience (hold + no hawkish shift), the soft landing narrative revives and equities extend Monday’s bounce. |
The Shah gas field strike in the UAE opens a dangerous new front — The war has now spread beyond Iran to the UAE’s energy infrastructure. If drone attacks on Gulf state assets become routine, the war premium reprices dramatically higher — insurance costs, shipping rates, and physical supply risks all spike. This changes the oil calculus even if Hormuz partially reopens.
Focus Survey IPCA at 4.10% above the ceiling — expectations are deanchoring — The breach of 4% is psychologically significant. If the next Focus survey (March 23) shows further deterioration toward 4.20–4.30%, the BCB’s credibility is under genuine threat. Cutting rates while expectations are rising is a classic EM policy error that the market punishes with currency weakness and DI curve steepening. The Copom hold scenario, even at 5–10%, would be devastating for equities — The market has positioned for 25 bps. A surprise hold would be the biggest hawkish shock since the 2023 cycle. Banks, homebuilders, and retail stocks would sell off 3–5% intraday, and the Ibovespa would immediately retest the 200-day SMA. Monday’s bounce may be a dead-cat setup ahead of triple event risk — Wednesday brings Copom + FOMC + Nvidia GTC reaction + ongoing war headlines. The 1.25% rally recovered only a fraction of last week’s 5.04% loss. With RSI still below 50 and the MACD histogram deeply negative, the technical structure remains bearish. Position compression ahead of event risk, not a genuine trend reversal. |
Positioning BOTTOM LINE
Tuesday is the calm before the storm. The Copom and FOMC both begin deliberations today; both announce tomorrow. The Ibovespa at 179,875 sits in no-man’s land between the 200-day SMA at ~176,163 (floor) and the 50-day SMA at ~181,149 (ceiling). Expect a compressed range — the market has no incentive to take directional bets with two central bank decisions 24 hours away.
The positioning call remains defensive with a Copom-conditional tilt. If the BCB delivers 25 bps to 14.75% with measured forward guidance (data-dependent, no pre-commitment to pace), the Ibovespa should hold 179,000–181,000 and the real stays near R$5.20–5.25. This is the base case and it’s largely priced. The tail risks are: (1) a hold, which sends the index to the 200-day SMA intraday; (2) a 25 bps cut with dovish guidance that reignites inflation fears and weakens the real; or (3) a war escalation headline — particularly any follow-up to the Shah gas field strike — that overwhelms domestic catalysts entirely. The only position worth holding through the event is oil-linked: Petrobras and PRIO benefit regardless of the Copom outcome as long as Brent stays above $95. Everything else is a coin flip until Wednesday. As noted in yesterday’s analysis, cash remains king ahead of the decision.
RT Staff Reporters · This newsletter is for informational purposes only and does not constitute investment advice. Always consult a licensed financial advisor before making investment decisions. Past performance does not guarantee future results.