Recent election dynamics, with Flávio Bolsonaro leading President Lula in Brazil’s first-round presidential vote, have driven BRL strength and pushed USD/BRL below 5.00 for the first time since May, reflecting market expectations of improved fiscal discipline and a narrower rate differential versus the Fed funds rate near 4%. Brazil’s Selic at 13.75% continues to support carry trades, while downgraded 2026 GDP forecasts to around 1.8-2% and persistent above-target inflation temper enthusiasm. Commodity export resilience and external accounts provide a buffer, yet potential runoff volatility on October 25 and any Fed tightening signals could reintroduce depreciation pressure toward consensus year-end targets near 5.20. Trader positioning in USD/BRL markets reflects these crosscurrents between domestic political shifts and global monetary paths.