COLCAP Rebounds 2.1% but Posts Worst Week of 2026 as Rate Shock and Trump-Petro Thaw Collide

Colombia’s markets spent the first week of February processing two seismic events: a central bank rate hike that nobody expected, and a diplomatic thaw that nobody predicted. The result was a week of violent cross-currents — equities plunging, the peso holding firm, and investors scrambling to recalibrate their Colombia thesis.

This is part of The Rio Times’ daily coverage of Colombian markets and Latin American financial news.

For context on regional markets, see Brazil’s Ibovespa for the same session.

Also tracking regional peers: Chile’s IPSA closed the same session.

The week began under the shadow of Banco de la República’s January 30 bombshell: a 100-basis-point rate hike to 10.25%, the first increase in nearly three years and far larger than the 25-50 bps that analysts had penciled in.

The decision, backed by four of seven board members, came after inflation refused to fall below 5.1% — well above the 3% target — and the central bank revised its 2026 year-end inflation forecast sharply higher to 6.3%. Bloomberg reported that the move “surprised all analysts” and reflected growing alarm over persistent food and energy price pressures.

The COLCAP index, which had been riding a remarkable bull run from 1,200 in late 2023 to a record 2,469.50, suffered its worst weekly decline of 2026, shedding 4.23% as higher borrowing costs threatened the corporate earnings recovery that had fueled the rally.

The sell-off was broad-based, though Friday’s session offered relief: Grupo Nutresa surged 8.14% to lead a 2.14% COLCAP rebound that closed the index at 2,370.10.

The currency told a different story. Despite the equity carnage, the peso barely flinched — USD/COP closed the week at 3,681.5, up just 0.39%.

The rate hike itself was peso-positive (higher yields attract carry-trade flows ), and the diplomatic breakthrough between Presidents Trump and Petro on February 4 removed a major tail risk.

The Atlantic Council described the Oval Office meeting as “surprisingly cordial”, a sharp contrast to the tariff threats and deportation flight standoffs that had defined the relationship just weeks earlier. The peso has now strengthened roughly 12% from its September 2025 peak above COP 4,200 per dollar.

The macro backdrop remains complicated. Colombia’s economy is projected to grow 2.6% in 2026 according to the World Bank, supported by resilient consumption, but the Petro government’s 24% minimum wage increase and ongoing fiscal expansion have kept inflation stubbornly elevated.

As Rio Times reported, Latin America’s fourth-largest economy is “caught in a policy tug-of-war” between an expansionary fiscal stance and a hawkish central bank — and the January rate hike was the clearest signal yet that BanRep will not tolerate further inflation drift.

The 100-basis-point rate hike has fundamentally altered the investment calculus for Colombia. BBVA Research noted the “split decision” reflected deep divisions within the board, with two members favoring a 50-bps cut and one voting to hold — a three-way split that underscores the uncertainty surrounding Colombia’s inflation trajectory.

Itaú’s latest forecast puts 2026 year-end inflation at 6.7%, even higher than BanRep’s own 6.3% projection, suggesting the hiking cycle may not be over.

For equities, the rate shock creates a dual headwind: higher discount rates compress valuations on the COLCAP’s bank-heavy composition, while elevated borrowing costs threaten the consumer spending recovery that had been driving earnings growth.

The index’s 97% rally from its 2023 lows to the 2,469 all-time high was built on expectations of continued monetary easing — expectations that the January decision has shattered.

Goldman Sachs projects Colombia’s GDP growth at just 2.6% for 2026, part of a broader Latin American slowdown that sees the LA7 economies averaging 1.9% growth.

The peso’s resilience, however, tells a more nuanced story. At COP 3,681.5, the currency is near its strongest level since early 2024, supported by three pillars: the rate hike’s carry-trade appeal (10.25% is among the highest real rates in EM ), the Trump-Petro diplomatic normalization, and declining oil import costs.

The peso has outperformed most EM peers in 2026, and the weekly RSI at 38 on USD/COP (indicating peso strength) suggests the trend has room to continue — though the oversold reading also warns of a potential dollar bounce.

COLCAP Key Levels

USD/COP Key Levels

COLCAP technicals: The daily RSI at 74.61 is in overbought territory, though Friday’s bounce suggests dip-buyers are active. The MACD histogram has turned negative (-22.41) even as the signal lines remain elevated (80.08 vs 57.67), a classic momentum divergence that often precedes further consolidation.

Price remains above the Ichimoku cloud on the daily timeframe, maintaining the bullish structure, but the weekly candle — a large red bar dropping 4.23% from the all-time high — is a textbook distribution signal.

The 200-day MA sits far below at 1,890.54, confirming the long-term uptrend remains intact even if a 10-15% correction materializes.

USD/COP technicals: The daily RSI at 50.00 is perfectly neutral, reflecting the peso’s consolidation after its six-month strengthening trend. The MACD is bearish (signal at -16.8, histogram at -24.5) but the blue line at 7.7 is attempting a bullish crossover, suggesting the dollar may be finding a short-term floor.

Price trades well below the Ichimoku cloud and the 200-day MA at 3,924.6, confirming the dominant peso-strength trend. The weekly RSI at 38.02 is approaching oversold territory for the dollar — a level that has historically preceded at least temporary USD/COP bounces.

The coming week will test whether Friday’s COLCAP rebound was a dead-cat bounce or the start of a genuine recovery.

Three catalysts dominate the calendar: Colombia’s January inflation data (expected to confirm the upward trend that prompted the rate hike), the fallout from the Trump-Petro diplomatic reset (trade and migration agreements are reportedly in progress), and global risk appetite as US CPI data on Wednesday could reshape Fed rate expectations and EM capital flows.

For the COLCAP, the 2,314 level (Friday’s open) is the near-term line in the sand — a break below reopens the 2,244-2,180 zone where the 20-week and 50-day moving averages converge.

For the peso, the 3,712 Ichimoku cloud base is the key resistance; a break above would signal the start of a peso weakening cycle that could carry USD/COP back toward 3,775-3,925.

The rate differential (10.25% vs US 4.5%) continues to favor peso carry trades, but the political calendar — with Colombia’s 2026 elections approaching — adds a layer of uncertainty that could widen risk premiums in the months ahead.

Verdict

Colombia’s markets are caught in a classic late-cycle divergence: a strong peso (carry-trade flows + diplomatic relief) coexisting with a weakening equity market (rate shock + overbought technicals).

The COLCAP’s 97% rally from its 2023 lows was priced for continued monetary easing — and BanRep just pulled the rug. The weekly RSI at 78.38 on the index and the 4.23% weekly decline from the all-time high suggest the correction has further to run, with 2,244-2,180 as the logical landing zone.

The peso, meanwhile, benefits from the very same rate hike that is punishing equities — a 10.25% policy rate in a 5.1% inflation environment offers real yields that few EM peers can match.

The resolution will come from inflation data: if the January print confirms the upward drift, expect BanRep to hike again and the equity-currency divergence to widen. If inflation surprises lower, the COLCAP can reclaim its all-time high — but that is not the base case.