USD/CLP Outlook: Bearish, as the rate is below its recent average and near recent lows amid a challenging US economic environment.
Key drivers:
• Rate gap: The Federal Reserve is expected to lower interest rates further, which diminishes the appeal of the US dollar compared to the more stable monetary policy from the Central Bank of Chile.
• Risk/commodities: Falling confidence in the US dollar is compounded by geopolitical tensions, which lead to market volatility and could drive investors to safer currencies like the peso.
• One macro factor: Recent political changes in Chile, including the election of José Antonio Kast, have improved market optimism, further supporting the peso.
Range: The USD/CLP is likely to drift lower within its recent trading range, facing resistance as it approaches recent lows.
What could change it:
• Upside risk: A sudden improvement in US economic indicators could boost the dollar's attractiveness.
• Downside risk: Continued geopolitical tensions or additional rate cuts by the Fed could push the dollar lower.
