TD Securities has highlighted a shift in the outlook for the Colombian Peso (COP) against the US Dollar, noting that the supportive combination of tight monetary and loose fiscal policy that has driven COP strength is fading. The firm points out that the Banco de la República’s (BanRep) interest rate hiking cycle is nearing its end, with little expectation for policy rates to return to 2022 levels. This change is significant as domestic inflation has decreased from over 13% in 2022 to 6% in 2026, reducing the impetus for further aggressive monetary tightening [1].
On the fiscal front, the market anticipates fiscal consolidation under De La Espriella, which is expected to limit the positive fiscal impulse that has previously supported the currency. TD Securities notes that while Colombia is not immediately shifting to a loose monetary and tight fiscal policy mix—which would be outright bearish for the COP—the evolving domestic conditions are likely to cap any further downside in USD/COP below 3000. Instead, the pair is seen as more vulnerable to upside risks, particularly in the event of risk-off shocks [1].
TD Securities also references recent market movements, stating that the COP experienced a sharp rally following the Colombian Presidential election in Q2 2026. Both short and long-term fair values for USD/COP are currently estimated in the 3200-3300 range, and the selloff toward 3000 in August was quickly reversed back to the 3100-3200 range [1].
CONCLUSION
TD Securities sees the Colombian Peso's recent strength as increasingly constrained by changing domestic monetary and fiscal conditions. With the BanRep hiking cycle ending and fiscal consolidation on the horizon, the USD/COP is expected to face more upside risk, especially during periods of market stress.