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Moderate CLP Weakness As Potential For Larger Interest Rate Cut Lingers

CHILE
  • The Chilean peso has softened today, with USDCLP (+0.31%) rising back to ~912, as attention remains on the possibility for more aggressive monetary easing following the recent undershoot of inflation. The fall of headline CPI to just 3.9% y/y in December, from 4.8%, may open the door to a larger 100bp interest rate cut when the BCCh monetary policy committee next meets on Jan 31st.
  • USDCLP strength is registering broadly in line with the uptick for the broad USD index to start the week, with most regional currencies trading with a downward bias.
  • Despite today’s 1.2% rise for copper futures, downside momentum for the red metal has been evident this year, with month-to-date declines in the region of 2.65% helping to strengthen the overall bullish technical theme for USDCLP.
  • The next key level to the topside at 924.67, the Nov 13 high, was recently tested. Clearance of this level would signal scope for a move towards 955.00, the Oct 16 high. Initial support moves up to 888.44, the 50-day EMA.

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