December 9, 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.

The Colombian peso records its best performance since mid-November, showing a notable gain against the US dollar in a context marked by key movements in international markets. Today, the USDCOP has fallen by 0.6%, establishing itself as the leading currency in gains within the LATAM region. This behavior stands out in a scenario where oil prices, one of Colombia’s main economic drivers, are rising due to announcements from China and geopolitical developments in the Middle East.

Brent crude oil has climbed to around $72 per barrel, driven by the announcement of “moderately loose” monetary policies in China, the world’s largest oil importer. This easing, combined with political instability in Syria, has provided relief to the oil market. For Colombia, a nation highly dependent on oil exports, this dynamic has offered temporary respite to the peso, which last week was trading at its lowest level since 2023.

However, significant challenges remain for the COP. On the international front, markets are awaiting new inflation data from the United States, which will be crucial in shaping expectations regarding Federal Reserve policies. Higher-than-expected figures could increase pressure on the Colombian peso and other LATAM currencies by reducing the likelihood of interest rate cuts by the Fed in 2025.

Domestically, the fiscal outlook remains a cause for concern. Colombia’s high budget deficit levels limit the room for maneuver to address external pressures and could act as a structural factor preventing a sustained recovery of the peso.

In summary, while the Colombian peso has shown an encouraging recovery, this seems to reflect temporary external factors rather than a fundamental improvement in internal indicators. The COP’s ability to consolidate this progress will largely depend on the evolution of the oil market, U.S. economic data, and the Colombian government’s actions to tackle persistent fiscal challenges.

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