Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
March 19, 2025 –
“The Colombian peso is facing significant pressures amid local uncertainty, despite recently published strong economic indicators. The COP fell sharply after once again encountering resistance at 4,070 pesos per dollar, marking a rebound from the 2025 lows, and dropping by nearly 1% during the session.
Volatility increased considerably following rumors about a possible resignation of Diego Guevara from the Ministry of Finance, raising uncertainty in local financial markets. Although his departure was not officially confirmed, speculation alone was enough to erode investor confidence, leading to a temporary peso drop of up to 1.7%, accompanied by significant declines in Colombian dollar-denominated bonds.
Guevara, known for his commitment to fiscal and macroeconomic stability, had clashed with President Gustavo Petro over key issues such as reducing public spending. This internal tension reflects a complex political landscape, making it harder to pass critical reforms, such as labor and pension reforms, further increasing the risk of polarization ahead of the 2026 presidential elections.
Regarding economic data, Colombia recently reported moderate growth in its Economic Tracking Indicator (ISE), with an annual expansion of 2.65% in January, slightly below December’s 2.95%. The Colombian economy remains primarily driven by the services sector, which recorded a solid annual growth of 3.89%, solidifying its position as the country’s main economic driver.
However, not all sectors showed the same strength. Primary activities, including agriculture and mining, contracted by 0.13%, highlighting challenges in key economic segments. Meanwhile, manufacturing and construction saw modest growth of 0.51%, providing relative stability in an otherwise challenging environment.
The Colombian peso’s future outlook will largely depend on decisions and statements from the Federal Reserve. It is widely expected that the Fed will keep interest rates stable in the short term; however, any dovish signals from Jerome Powell could provide temporary support for the Colombian peso. On the other hand, a more cautious stance from the Fed could strengthen the dollar, maintaining additional pressure on the Colombian currency.
Additionally, fiscal challenges remain a critical factor for the country’s monetary stability. Colombia closed 2024 with a fiscal deficit of 6.8% of GDP, the highest figure since the pandemic, prompting Fitch Ratings to downgrade the country’s credit outlook from stable to negative, while maintaining its BB+ rating.
The Central Bank of Colombia will face complex decisions in its upcoming meeting on March 31, especially amid this political uncertainty. If the situation with the Ministry of Finance remains unclear, it could trigger additional volatility in the Colombian peso, in a highly sensitive environment influenced by both domestic and external developments.”
Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone