November 5, 2024 (Globalinvestorideas.com Newswire) Globalinvestorideas.com, a go-to platform for big investing ideas releases market commentary from Quasar Elizundia,Expert Research Strategist at Pepperstone.
“Despite worse-than-expected results in the IMACEC index, the Chilean peso began the week with positive performance. This rise is mainly attributed to the weakness of the U.S. dollar, which faces adjustments in market expectations ahead of the upcoming U.S. presidential elections, where the outlook for a potential victory by former president Donald Trump is not yet clear.
The Chilean peso is seeing its best performance since mid-October, showing a relative recovery after trading at its lowest levels since mid-year despite an adverse macroeconomic context. The latest IMACEC data revealed a stagnation in Chile’s economic activity during September, marking the worst reading since December 2023, when the indicator was negative at -0.7%. On a seasonally adjusted basis, economic activity contracted by 0.8% month-over-month, with a notable negative contribution from the mining sector.
These results follow last week’s report of a slowdown in retail sales during September, collectively reflecting a context of relative internal weakness. The lack of momentum in economic activity could have implications for monetary policy at the Central Bank of Chile. If this trend continues, the institution may lean further towards normalization, intending to continue reducing the cost of money. Since mid-last year, the Central Bank has cut interest rates by 6% and may feel compelled to continue supporting the economy.
It is essential to emphasize that the weakness of the U.S. dollar has been a key factor in the recent strength of the Chilean peso. With the approach of the elections and expectations of further rate cuts by the Federal Reserve, the dollar has shown signs of weakening, which has benefited currencies like the Chilean peso. However, for the Chilean peso, uncertainty persists, and the market will remain attentive to the third-quarter GDP release in mid-November, which may offer a clearer perspective on the state of the Chilean economy.”
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