The Colombian peso is showing notable resilience at the start of this week, limiting the downward pressures affecting other Latin American currencies.
This performance is due to a combination of internal and external factors, including the rise in oil prices and domestic economic data that provide some hope, although significant challenges remain.
The global context is complex. Although the USD/COP experienced a slight increase of +0.05%, the strength of the US dollar, driven by better-than-expected US labor data, continues to be a pressure factor.
These data have delayed expectations of interest rate cuts by the Federal Reserve, strengthening the dollar and creating headwinds for emerging market currencies, including the Colombian peso. The robustness of the US labor market acts as a catalyst for energy demand, which in turn puts upward pressure on commodity prices like oil.
However, the Colombian peso finds important support in the rebound of oil prices, a key driver for the country’s export economy. Crude prices have seen significant gains, driven by the strength of the US labor market, supply restrictions by OPEC+, and geopolitical factors.
This increase in oil prices boosts investor sentiment and helps moderate the peso’s depreciation. As observed, crude has recently found support around $67 per barrel for WTI, positively impacting Colombia’s prospects.
On the domestic front, consumer confidence data offer a ray of optimism. The Consumer Confidence Index (CCI), according to Fedesarrollo, improved in December 2024, reaching -3.4 points, a rise of 2.3 points compared to November. This is the highest level since August 2022. While the index remains in negative territory, the improvement in consumers’ future expectations, with an increase of 4.4 points, suggests greater confidence in the economy in the medium term. This data, though still early, could ease the pressure on the US dollar and lay the groundwork for greater peso stability. The improvement in consumers’ future expectations is a key indicator pointing to a potential economic trend reversal in Colombia.
Nonetheless, significant risks remain. The upcoming inauguration of Trump and uncertainties surrounding his trade policies could generate volatility in currency markets, favoring safe-haven assets like the dollar. Additionally, the release this week of November’s industrial production and retail sales data in Colombia will be critical. Weak results could heighten concerns about economic growth, while strong data could strengthen the peso and boost investor confidence.
In conclusion, the Colombian peso stands at a complex crossroads, but with signs of relative resilience. The rise in oil prices and the improvement in consumer confidence provide a reprieve against the strength of the dollar and global uncertainties. However, it is essential to closely monitor upcoming domestic economic data and the evolution of the international context to assess the peso’s trajectory in the short and medium term. This balance between internal and external factors will determine the direction of the Colombian peso in the coming months.
