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What the Colombian Peso tells us about next Sunday

Ground rules:

  • This chart shows the Colombian Peso / US Dollar (COP/USD) pair trade, 2022 YTD
  • The lefty Gustavo Petro is bad for COP
  • The election was on May 29th, the run-off is next Sunday June 19th

At the start of the year (1) Gustavo Petro was firmly established as the election frontrunner, but during the first quarter (2) the consolidation of the established right wing around the candidacy of Federico ‘Fico’ Gutiérrez made him into a serious challenger, according to the voter intention polls. However, as the election moved into its last month, first (3) Fico showed weakness and Petro’s campaign consolidated its lead, then (4) the outsider challenger Rodolfo Hernández started running from a distant third place. When on election day (5) it turned out that Rodolfo Hernández had beaten Fico Gutiérrez into second spot and would face off against Gustavo Petro in the run-off vote on June 19th, the markets (6) decided that the right-wing populist outsider (quickly dubbed “Colombia’s Trump” in foreign media coverage) had the momentum and image to beat the Lefty Petro and become the next President of Colombia. However, the last set of polls published this weekend (7) indicate Petro is either in a statistical dead-heat or with an advantage for next Sunday’s vote and as a result, the COP has weakened back to just under 4,000 to the USD.

Bottom line: With the publishing of polls prohibited in Colombia this week even as plenty of its nation’s polling companies make big money by compiling late day voter intention surveys for private clients (read banks, brokerages, big businesses etc), those of us on the outside looking in on this tight race have a useful sentiment gauge in the next five days in the COP/USD pair. If Gustavo Petro wins on Sunday, expect the forex to drop to around 4,200.

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