Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
March 19, 2025 –
“The Chilean peso is consolidating its bullish momentum against the US dollar, extending gains accumulated since the beginning of 2024, supported by solid national macroeconomic data. On Tuesday’s session, the Chilean peso rose by 0.6%, standing out among emerging-market currencies and showing a notable recovery following volatility throughout 2024.
The recent strength of the Chilean peso finds support in the latest Gross Domestic Product (GDP) figures, reflecting a healthy economic recovery in the country. Particularly, during the fourth quarter of 2024, the Chilean economy grew by a solid 4% year-on-year, surpassing market expectations of 3.7%, and marking the highest growth since the second quarter of 2022. This positive performance was primarily driven by the mining sector, which recorded a robust expansion of 7.3%, significantly accelerating from the 4.6% seen in the previous quarter.
Nevertheless, despite the mining boost, seasonally adjusted figures reveal a moderation in the sector towards the end of the year, creating uncertainty about the sustainability of this trend and raising questions about its future impact on the Chilean peso.
In addition to the mining sector, Chilean domestic demand experienced a notable rebound, growing 4.3% compared to the -0.2% contraction in the previous quarter. This advance was led by a 2% increase in household consumption, driven mainly by a relative recovery in purchasing power and improved consumption expectations. Additionally, investment showed encouraging signs by increasing 3.3% after declining in the prior quarter, reflecting a recovery in business confidence.
On an annual basis, GDP growth in 2024 reached 2.6%, predominantly supported by a vigorous export performance. Chilean exports increased a robust 9.2%, significantly contributing to economic stability.
However, despite the favorable domestic environment, investor attention is now focused on external factors, particularly the upcoming interest rate decision by the US Federal Reserve. A more dovish tone from Chairman Jerome Powell could further strengthen the Chilean peso, attracting investment flows toward local assets. Conversely, a restrictive stance could put downward pressure on the Chilean currency, increasing short-term volatility.In summary, although the domestic economic outlook positively supports the Chilean peso, it is crucial to monitor the future performance of the mining sector and signals from international monetary policy, which could determine the sustainability of the peso’s recent strength against the US dollar. Upcoming market moves will be defined by a combination of strong internal fundamentals and external dynamics..”
Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone