This week, risk aversion remains volatile, with an associated uncertainty that could block emerging markets’ recovery. As long as China’s economic restrictions are not lifted permanently, negative pressures on aggregate demand will continue to restrict the growth of oil prices, limiting foreign capital inflow to exporting countries such as Colombia. Traders should be attentive to the monetary policy decision of the BanRep, which is expected to be restrictive, in response to last week’s inflationary surprise. This has led markets to discount a rate hike of +100pbs, leading to an intervention interest rate of 12.00%. This Thursday, Colombian industrial production and retail sales will reflect if the Colombian economy is still robust, defining the possibility of sustaining central bank rate hikes without inducing a recession. If macroeconomic data leads to a more hawkish monetary policy in Colombia, we expect the Colombian peso (COP) to be favored over the dollar, since the rate spread between the BanRep and the Fed could make Colombian rates more attractive for investors. Therefore, we expect a trading range for the week for the pair between COP$4,760 (lower limit COP$4,680) and COP$4,900 (upper limit COP$4,930).
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