The USD/COP pair is approaching the 3600 mark with the recovery of oil prices amid recent vaccine news. Recent action and a break below this level could open the path for a move towards 3350. However, analysts at CIBC maintain a cautious approach due to still present downgrade concerns.
“Fiscal risks remain high. We do not discount the possibility that the COP could lose ground on the back of downgrade fears as credit rating agencies scrutinize the prospects of reform during the last 18 months of the Duque administration.”
“On the monetary policy front, the central bank kept rates on hold on October 30, leaving little space for further rate cuts in the short term – a situation already priced in by the market.”
“Although a break below the 3600 mark could open the path for a USD/COP to 3350, we do not see much space for a sustained appreciation of the COP beyond the recent rally of oil prices. Moreover, we expect USD/COP to remain within 3600-3800 range for most of 2021 as fiscal uncertainties remain in place.”