- The Dollar rebounds 0.49% on the day against the Chilean Peso, reaching highs not seen since November 22.
- China’s National Bureau of Statistics will release industrial production and retail sales for November on Monday.
- The Central Bank of Chile will announce its interest rate decision on Tuesday.
- Investors will be attentive next Wednesday to the next rate move by the Federal Reserve.
USD/CLP with a daily low at 976.20, attracting buyers who pushed the cross to a two-week high not seen since November 22 at 981.97. Currently, USD/CLP is trading above 981.64, gaining 0.49% today.
The Chilean peso loses traction ahead of the publication of key economic data
China’s industrial production will be announced early Monday by the National Bureau of Statistics, which is expected to remain unchanged in November and stand at 5.3%. Likewise, it will publish retail sales, whose analyst consensus projects a decrease to 4.6% from $4.8 recorded in October.
On the other hand, the Central Bank of Chile is expected to modify its interest rate downwards from 5.25% to 5.00% next Tuesday. Following the same tune, investors will be attentive to the possible interest rate cut on Wednesday, December 18 by the Fed, to place it at 4.50% from 4.75%. The FedWatch tool indicates a 97.1% probability of placing the reference interest rates in a range between 4.25%-4.50%.
Technical levels in the USD/CLP
USD/CLP reacted higher on short-term support given by the December 6 low 966.89. We see the next key support area at 940.90, in convergence with the 50% Fibonacci retracement. To the upside, the nearest resistance is at 989.40, the April 16 pivot point.
USD/CLP Daily Chart
The US Dollar FAQs
The United States Dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions. After World War II, the USD took over from the pound sterling as the world’s reserve currency.
The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, which favors the price of the dollar. When Inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the Dollar.
In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US Dollar.
Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
