January 19, 2023 15:45 GMT
June 2022 Low Marks Firm USDCLP Support
- A downturn in short-term global risk sentiment has prompted some renewed pressure on LatAm currencies in the last 24 hours. The Chilean peso has been no exception with USDCLP rallying around 2.5% from Wednesday’s lows.
- Supporting the move higher is the fact USDCLP has matched the June 2022 lows and a key support. Despite the overall bearish outlook for USDCLP, there are plenty of fundamental headwinds in Chile as indicated by the earlier Fitch report highlighting the political uncertainty surrounding the constitutional re-write weighing on the economic outlook.
- Additionally, President Boric’s approval rating continues to dwindle, falling a further 2pps to 25%, according to the latest Cadem survey. This has the potential to be further impacted by the most recent rejection of the controversial $2.5bn iron and copper Dominga mining project which has been criticised by the mining industry.
- Focus on the domestic docket turns to the next BCCh meeting/decision, scheduled for January 26. Rates are expected to be held at 11.25% amid CPI dipping to 12.8% and economic activity falling 2.5% Y/y in November. Consensus is for the next move from the central bank to be rate cuts, however, this timeline remains unclear. The latest BCCh economist survey indicated a 2023 year-end rate forecast at 7.00%.
- On the upside for USDCLP, initial resistance is seen at 843.01, the 20-day EMA.