CAD/CLP Outlook:
The CAD/CLP exchange rate is likely to increase as it currently trades well above its recent average and is supported by strong oil prices.
Key drivers:
• Rate gap: The Bank of Canada has a more hawkish stance compared to the Central Bank of Chile, which may strengthen the CAD against the CLP.
• Risk/commodities: Oil prices are at multi-week highs, benefiting the CAD, as higher crude prices positively impact Canada's economy and trade revenues.
• One macro factor: Chile faces challenges, including severe wildfires and a transitional political climate, which could pressure the CLP.
Range:
Expect the CAD/CLP to test the upper extremes of its recent range as higher oil prices bolster the CAD.
What could change it:
• Upside risk: A significant escalation in oil prices could further elevate the CAD.
• Downside risk: A negative outlook for Canada’s services sector could dampen CAD gains.