Bias: Bearish-to-range-bound, as the GBP is below the 90-day average and in the lower half of the 3-month range.
Key drivers:
- Rate gap: The Bank of England is cautious about rate cuts while the Central Bank of Chile recently lowered rates, suggesting a wider interest rate differential that may strengthen the CLP against the GBP.
- Risk/commodities: Rising copper prices support the Chilean economy and the peso, enhancing demand for Chilean exports, which weighs on the GBP.
- Political developments: The election of José Antonio Kast and his proposed economic reforms have improved market confidence in the CLP, adding upward pressure on the currency.
Range: The GBP/CLP is likely to drift within the lower half of its recent range, with potential volatility reflecting market conditions.
What could change it:
- Upside risk: A surprise economic report from the UK could bolster the GBP if it signals stronger growth or reduced inflation.
- Downside risk: Further declines in UK economic performance or renewed geopolitical tensions could lead to additional depreciation of the GBP against the CLP.