GBP/CLP Outlook: Slightly weaker, but likely to move sideways as the rate is below its recent average and near recent lows.
Key drivers:
• Rate gap: The Bank of England is moving cautiously with rate cuts while the Central Bank of Chile has already reduced rates significantly, widening the rate difference between the two currencies.
• Risk/commodities: Rising copper prices are benefiting the Chilean economy by boosting export revenues, which supports the peso against the pound.
• One macro factor: The UK's projected slow GDP growth and declining wage growth reflect economic strain, adding downward pressure on the British pound.
Range: The GBP/CLP is expected to drift sideways within the recent range with limited movement expected outside current levels.
What could change it:
• Upside risk: A surprising improvement in UK economic data could strengthen the pound.
• Downside risk: Increased geopolitical tensions or a further decline in economic outlook for the UK might drive the pound lower.
