CitiFX Wire Market Commentary – FXLM – Intended for Institutional clients only
COP update: Local elections coming up
By Daniel Perez Ortega
Now that the court has ruled and wasn’t as catastrophic, thanks to the fact that they ruled against the financing law as a whole but effective starting next year and giving time to pass a new one, we go back to business as usual.
We continue to range trade between 3400 and 3500, today at 3440, and I would expect to continue to do so with a tendency to move towards the upper side of the broad range. COP has depreciated 5% YTD and 10% YoY, kind of in similar direction with BRL and CLP, but trading at an almost 4 year low against MXN.
Current account deficit continues to be the biggest worry among investors, which one would expect that at all-time highs in FX levels it should help to close it: we will see about that. Last round of depreciation in 2014 did little on that front.
Cash in USD locally continues to be squeezed and it is traded at an implied rate of Libor+120bps. I do not see an event that could inject cash into the system, on the contrary, summed to the continued interest from offshore investors to take cash out, year-end is usually a season for corporates to do the same, so one could expect for the situation to maintain or worsen in the coming weeks.
This coming Sunday local elections are being held for governors and majors. In Bogota the race seems fairly tight between Carlos Fernando Galan, former Senator, center/right and traditionalist politician who claims to be independent but comes from the liberal party, and Claudia Lopez a center/left somewhat new politician who was a Senator and lost the presidential election as a vice-president with Sergio Fajardo from Partido Verde. Lopez had a hefty advantage against all other candidates a few months ago and she has consistently lost ground to a point where there are polls showing her as a runner up.