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USDCOP Extends Bounce To 9% From January Lows

COLOMBIA
  • COP is the worst performing EM currency on Wednesday as the combination of a stronger dollar, weaker commodity complex and domestic political uncertainty all add pressure on the peso.
  • Today’s move extends the USDCOP bounce from the January lows to around 9% and turns the pair positive on the year. Peso weakness today has been exacerbated by not only the stronger greenback, but also some renewed weakness for oil prices, with both WTI and Brent crude futures declining around 1.5%.
  • Additionally, markets may be reacting to yesterday’s Manufacturing production, retail sales and consumer confidence data, all disappointing and potentially signalling a sharp slowdown in the economy this year. It is worth noting that GDP data released today, although showing an above-estimate reading at 0.7% Q/q, lower revisions to the prior reading more than offset the beat.
  • Perhaps most importantly, local asset weakness may be reflecting the latest political developments. Not only did President Petro amp up his anti-business rhetoric overnight in relation to the pension system, but Fitch Ratings also commented that the plan to overhaul Colombian health, pension and labor laws “causes uncertainty that isn’t helpful to the business sector”.
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