29.09.202621:06:42UTC+00Brazilian Real Gains Ahead of Presidential Election

The Brazilian real strengthened to 5.20 per USD, in line with gains across other emerging markets, as traders stayed cautious ahead of the October presidential election. Recent polls indicate that President Lula and Senator Flávio Bolsonaro are effectively tied within the margin of error in a potential second-round runoff. From a market perspective, Bolsonaro is seen as the more fiscally conservative candidate, against a backdrop of elevated domestic interest rates and subdued business activity.

On the labor front, Brazil generated 165,827 formal jobs in August, surpassing expectations of 95,700 and rising sharply from 58,568 in July, marking the strongest monthly result since March. The unemployment rate held at 5.3% in the rolling quarter ended in August, unchanged from the previous quarter and in line with forecasts.

Despite the solid payroll numbers, job creation remains softer than in 2024 and early 2025, consistent with a gradual cooling of the labor market and projections for GDP to be roughly flat in the third quarter of 2026. Overall, the data did little to alter expectations that the central bank will continue easing the Selic rate.