Colombian Peso Weakens as Fiscal Concerns and Technical Signals Drive USD/COP Higher

The Colombian peso lost ground against the US dollar in the last 24 hours, with the USD/COP rate closing near 4,088 on July 1, 2025. Official charts and exchange data confirm this move, as the peso extended a reversal that began on June 26.

This shift reflects both mounting fiscal worries and clear technical signals, according to central bank releases and market data. The Bank of the Republic maintained its policy rate at 9.25% in June, citing persistent inflation and a larger fiscal deficit.

The decision came after annual inflation in May slowed only marginally to 5.1%, with food and services prices remaining stubborn. The central bank highlighted that the projected fiscal deficit for 2025 has widened.

Additionally, the activation of the fiscal rule’s escape clause leaves less room for monetary easing. This stance keeps Colombia’s real rates high but does not fully offset investor concerns about fiscal sustainability.

Economic reports show that Colombia’s economy is recovering, with first-quarter growth at 2.7%. Private consumption and machinery investment remain strong, but construction lags. Inflation is expected to gradually decline, yet it remains above the bank’s 3% target.

The fiscal deficit persists due to rigid spending and slower-than-expected revenue growth, increasing Colombia’s risk premium and the cost of debt.

These factors weaken the peso’s outlook and pressure financial variables, especially as reduced oil revenue and global uncertainty weigh on the country’s terms of trade.

Technical analysis of the daily USD/COP chart confirms the peso’s weakening trend. The price rebounded from support near 4,027 and now tests resistance around 4,103.

The 50-day, 100-day, and 200-day moving averages all sit above the current price, signaling a bearish long-term bias. However, the daily MACD histogram shows a reduction in negative momentum, hinting at a possible bullish crossover.

The RSI has climbed to 39.6, moving away from oversold territory but still below the neutral 50 mark. Bollinger Bands indicate a bounce from the lower band, suggesting short-term support but also highlighting continued volatility.

The four-hour chart reinforces this short-term reversal. The MACD has crossed bullishly, and the RSI stands at 58.4, indicating rising buying pressure. Price action has moved above short-term moving averages and now faces resistance at 4,106.

Volume remains steady, but no significant spikes suggest a lack of strong conviction behind the move. The combination of persistent fiscal risks, cautious central bank policy, and technical signals has led traders to unwind peso positions.

The market’s focus remains on Colombia’s ability to address its fiscal deficit and inflation, while technical traders watch for a break above 4,106 to confirm further peso weakness.

The story behind the figures is one of a currency under pressure from both policy and market forces, with investors demanding clear fiscal discipline before returning to the peso.