GBP/CLP Outlook:
The GBP/CLP pair is currently bearish, trading below its recent average and near recent lows. This trend is primarily influenced by ongoing political instability in the UK, which weighs on the pound.
Key drivers:
• Rate gap: The Bank of England's dovish stance on monetary policy is contrasting with the Chilean Central Bank's stable interest rate, affecting GBP negatively.
• Risk/commodities: The Chilean peso is under pressure due to challenges in the mining sector, particularly with copper production, which feeds uncertainty into the currency’s valuation.
• One macro factor: Recent political events in the UK have raised concerns over Prime Minister Starmer's leadership, which could lead to further instability if Labour loses the upcoming by-election.
Range:
The GBP/CLP is likely to test recent lows, given it is currently at the lower end of its 3-month range.
What could change it:
• Upside risk: A decisive win for Labour in the by-election could restore confidence in the pound.
• Downside risk: Continued deterioration in the outlook for UK economic growth would further weaken GBP.
