By Felipe Barragán, Expert Research Strategist at Pepperstone
September 23, 2025 –
“The Colombian peso started the week with a supportive global backdrop but ran into a heavier local macro mix as fresh external-sector data landed. Globally, last Wednesday’s 25 bp Fed cut helped keep U.S. rates and the dollar in check, yet the message from Fed officials since then has been: don’t bank on a rapid easing cycle. That combination—one cut now, a higher bar for more—usually caps the dollar’s upside without delivering a full-blown tailwind to EMFX, leaving the COP to trade more on Colombia-specific drivers.
Those local drivers turned more complicated today. DANE’s July trade release showed the deficit widening to US$1.692bn, with imports up 16.2% y/y and the strength broad-based—manufactures alone rose 12.9% and accounted for the bulk of the increase. That marks a sharp deterioration from a year ago and extends the widening seen through 2Q, reinforcing the idea that the current-account gap is re-opening just as global financing conditions remain choppy.
The terms-of-trade pulse isn’t bailing Colombia out either. Oil remains stuck near the mid-$60s, whipsawing intraday on geopolitics but still pressured by ample supply and tepid demand—hardly the backdrop that typically delivers sustained COP strength. Meanwhile, Colombia’s own oil and gas output slipped in July, a fundamental headwind for export receipts.
Layer on top the fiscal narrative: after suspending the fiscal rule and floating a sizable revenue package, Colombia is still contending with ratings downgrades and a wider 2025 fiscal-deficit target—factors that keep a risk premium embedded in local assets and can curb COP rallies even when the global dollar is soft.
Policy expectations remain a swing factor. Markets and local surveys see BanRep easing only cautiously into year-end—a stance consistent with still-sticky inflation dynamics and the need to anchor the curve while fiscal questions are unresolved—so rate-differentials versus the U.S. should remain supportive but not dramatically so.
Overall, the COP still benefits from a softer-for-longer dollar narrative after the Fed’s initial cut, but the fuel for sustained appreciation is limited by Colombia’s widening trade gap, weaker hydrocarbon cash-flow, and lingering fiscal risk. Near term, look for two-way COP trading: global risk appetite and any additional hints on the Fed path can nudge it stronger, while further deterioration in external balances—or headlines that revive domestic fiscal uncertainty—would likely cap gains and reintroduce depreciation pressure.”