Brazil's central bank (BCB) surprised the market by foregoing a final rate cut overnight in what seemed like a hawkish effort to stem the tide of collapse in its currency. For a few brief minutes, it worked... but the Real is no collapsing lower again to more than 3.70/usd.

As Goldman Sachs noted, the BCB decision went against a broad market consensus expecting a final 25bp rate cut: only 2 of the 39 analysts surveyed by Bloomberg expected the Copom to leave the policy rate unchanged at 6.50%. The forward guidance hardened, now indicating the end of the long easing cycle.

This was one of the few instances where a central bank surprises a heavy market consensus and, yet, is likely to be applauded for it and gain credibility. The reason analysts were expecting a rate cut was not because in their assessment of the macro fundamentals and overall evolution of the balance of domestic and external risks further easing would be warranted, but simply because the central bank guidance from the previous meeting, reiterated in the Quarterly Inflation Report, clearly suggested so, and in recent weeks, amidst already clear currency pressures, central bank officials did not publicly abandon such guidance.

Overall, while the Copom communication with the market may have been imperfect, the decision to hold is, in our assessment, perfectly justified by the recent developments in external financial markets and the ongoing depreciation pressure on the BRL. We expect the Copom to leave the policy rate unchanged at 6.50% for the foreseeable future and expect the next move to be a hike.

However, it didn't and isn't and the Real is now down almost 20% since the end of January...

And don't forget, the Brazilian Real is what Bank of America called the best indicator of imminent emerging market turmoil...

And in fact, it is LatAm FX that is getting crushed - now at its weakest level ever relative to the broad EM FX...

And this weakness is continuing even as the region's biggest exports - commodities - are rising.