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USDCLP Edging Away From Touted Resistance, CIBC On The BCCh’s Stance On Further Strength

CHILE
  • Lower than expected domestic inflation prompted an impressive move higher for USDCLP earlier this week, culminating in the pair rising from 890 to yesterday’s high of 923.65. This came within close proximity of aforementioned resistance at 924.67, the Nov 13 high.
    • The price action was bolstered throughout Wednesday as the latest central bank survey of economists showed a divergence of opinions regarding the next BCCH decision. To recap, 39.5% respondents forecast a bolder 100bp rate cut versus 37.2% forecasting a 75bp move.
  • Since then, the spot rate has moderated and has continued to edge away from this resistance point on Thursday, declining 0.50%. The move lower is considered corrective at this juncture, and initial support lies at 886.64, the 50-day EMA.
  • CIBC have highlighted that the market is already pricing in a return to neutral by 2025 in line with the latest CB estimates (the only country in the region already there), suggesting limited room for further dovish surprises from the monetary policy front. Moreover, remember that at the end of October the BCCh expressed concerns with respect to rapid depreciation of the CLP in Q3 2023 and early Q4 2024 as it approached 950 and it also reduced the pace of rate cuts on the back of this trend. This level should continue to act as a line in the sand for the CB.
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