CAD/CLP Outlook:
Bearish, due to trading below its recent 90-day average and near recent lows.
Key drivers:
- Rate gap: The Bank of Canada is maintaining a cautious stance with interest rates steady at 2.75%, while the Central Bank of Chile has lowered rates to 5.0% to support growth, widening the gap in monetary policies.
- Risk/commodities: Oil prices are currently above their average, supporting the Canadian economy; however, recent volatility in oil has contributed to CAD weakness due to its commodity-linked nature.
- Economic performance: Chile's economy has seen growth driven by exports, particularly in mining, contrasting with recent stagnation in Canada’s economic activity.
Range:
The CAD/CLP is likely to drift within its recent range, limited by ongoing pressures from oil volatility and lackluster domestic economic indicators.
What could change it:
- Upside risk: A significant recovery in oil prices could strengthen the CAD.
- Downside risk: Continued political uncertainties in Chile could lead to renewed volatility impacting the CLP negatively.