(MENAFN- Investor Ideas) Investorideas, a go-to platform for big investing ideas releases market commentary from Quasar Elizundia, Expert Research Strategist at Pepperstone.
"The Chilean peso is experiencing a notable depreciation against the US dollar, surpassing the psychological threshold of 1,000 pesos per dollar - in a context marked by the dollar's strength and market caution ahead of potential federal Reserve decisions in 2025. This weakness is exacerbated by local economic data that falls short of expectations, generating additional pressure on the currency.
The CLP's weakening by more than 1% reflects a confluence of internal and external factors. Globally, the anticipation of a cautious stance by the Fed regarding interest rates for the coming year, amid the persistent resilience of the US labor market, strengthens the dollar.
Initial US jobless claims, which stood at 211,000, below the expected 222,000 and marking the lowest level in eight months, demonstrate the strength of the labor market, a factor that could influence future Fed decisions and, consequently, the value of the US dollar and the Chilean peso. The robust US labor market creates uncertainty about the interest rate path, directly impacting the exchange rate.
Locally, Chile's economic growth in November, at 2.1% year-over-year, although positive, fell below projections. The November Imacec, which recorded 2.1% year-over-year growth, with a seasonally adjusted 0.3% increase from the previous month, reveals a slower growth pace.
While key sectors such as goods production (+2.7% annually) and mining (+3.5% annually, driven by copper production) show dynamism, other sectors like services are experiencing a slowdown (-0.2% seasonally adjusted). Although mining and trade show positive performance, the overall growth moderation exerts pressure on the peso.
The trade sector, with 4.8% annual growth, driven by retail and wholesale trade, and the manufacturing sector, with 1.2% annual growth, offer mixed signals. While trade dynamism suggests a certain economic recovery, the slowdown in other sectors raises caution.
The coming weeks will be crucial in determining the trajectory of the Chilean peso. The release of trade balance and inflation data will provide key insights into the health of the Chilean economy. Upcoming economic data will be pivotal. Weak figures could intensify pressure on the peso, while positive results might provide some relief."
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