USD/CLP: Peso continues to lag
The Chilean peso is lagging the rally of its Latam peers. The fact that Chile could be the first of the big three in the region to cut rates may be no coincidence. Here June saw the central bank warn that the easing cycle could start in the ‘short term’. A 50-75bp rate cut is now expected at the 28 July rate meeting.
The central bank will cite inflation expectations anchored at 3% as the reason for the cut – even though core inflation is still 9% YoY. Chile may prove a test case for Latam FX and easing cycles.
Regarding Chile’s main export, copper – we see it at neutral $8300-8600/MT this year. And we think $/CLP stays near 800.
