The Market

Given the price movements of the Mexican peso in the last month, you must respect Mexico and its currency. On the back of US tariffs, the Mexican peso should be getting slaughtered. Mexico’s exposure to the US supply chain for industries like autos puts it right in the cross hairs of tariffs, no escape.

Tariffs were originally announced beginning February, and Mexico was given a 30-day reprieve. When tariffs became an issue again on March 3rd, the currency had weakened to a level of 20.73, a level very near its one-year low point.

Between March 3rd and April 4th, the peso strengthened by over 3% versus the US dollar as tariff talks calmed down.

But, since the announcement of President Trump’s steroidal tariff program, the Mexican Peso has weakened versus the US dollar back to the March 3rd level of 20.73, the level when investors viewed tariffs as a big threat.

Confusing, hard to follow. I know.

What is surprising is the fact that it never weakened past its lowest value in the last year. It never passed its weakest point of 20.85.

Who would have thought that it could stay above its low point with things looking so grim. In times past the Mexican peso would have gone way down in value in tandem with other emerging market currencies.

Impressive Mexican peso performance can be explained by many things, but the interest rate differential with the United States may be the most important.

At the time of the peso’s weak point on March 3rd, Etherfuse’s Mexican stable bonds, CETES, were yielding 3.5% more than US dollar stable bonds. As noted earlier, this 3.5% was a cushion, an added return to compensate investors for taking the risk of owning pesos versus the US dollar.

It was good compensation for peso risk because about one month later the currency is unchanged from its low point of 20.73 on March 3rd, . Not great performance at first glance, but on an annual basis if nothing changes between the US dollar and the peso, investors will still make about 3.5% more yield on peso stable bonds than on US stable bonds.

If the dollar goes down further, which is possible, the gain would be even more.

So, the key question to ask right now is will the value of the peso weaken by more than 3% versus the US dollar in the next months? If this happens, currency weakness can wipe out any annual interest rate gain.

So far this has not happened. So far, it may be concluded that the worst is over for Mexico and the peso. They may have weathered the storm nicely.

If the US dollar weakens, the peso trade is great. If the Mexican peso does nothing from this level, stays unchanged, the trade is still good on an annual basis.

Regarding the US dollar, there are few positives going for it, so at a minimum it could stay at this level, unchanged.

A trade borrowing US dollar stable bonds to finance the purchase of Mexican stable bonds could be a good idea, providing a 3.5% yield pick-up on an annual basis.

But whatever the trade, the key is to watch the peso level of 21.5 to the US dollar, a level that reflects over 3% weakness versus the US dollar at the present time April 8, 2025. If the peso goes to 21.5, the trade doesn’t work.

But, in the end, remember, if nothing changes, all is good.

Whatever happens, you have to respect the peso and Mexico. In times past, a crisis of this magnitude would have crushed the Mexican peso. It has done well, so far, and should be proud.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

If a country wants to grow in greatness, it must increase its rate of personal savings. To do this, countries need to create products that allow savings habits to be developed across the whole income range of the population. The masses must have a means to save large, small, and micro amounts.

At present, there are countries that have good savings mentalities and some that don’t. In Germany the savings rates hit 11.5% of income in 2024. France’s 4th quarter 2024 household savings rate was 18.4%. These are good, but they can be bigger, greater. The country lagging in the savings race is the United States of America. In 2024 the US personal savings rate was 3.8%, which is lower than the long-term average of 8.56%.

To be great, this must go up.

In times past, a pillar of US savings power was US Savings bonds. In the 1950s,1960s, and 1970s US savings bonds were given for births, weddings, and graduations. They were bought, given, and held to maturity with a sense of pride in the USA.

Pride and savings should combine again.

Also, Christmas Clubs used to be popular in the US. Workers, usually in the retail space, would save money every paycheck. The interest earned was very low if anything at all, but at Christmas time they had money for Christmas gifts.

Conceptually, a product combining the features of US Savings Bonds and Christmas clubs could be a key to savings in the United States, or elsewhere, growing and leading to greatness.

To be fair, both ideas still exist in the United States. The problem is that there is a minimum amount of $25 dollars to buy US savings bonds, and savings clubs are long forgotten. For a savings program to have teeth people must be able to invest “micro” amounts on a monthly or bi-weekly basis. Frankly, a $25 dollar minimum is too much and acts as a headwind to true savings.

A habit of saving “micro” amounts can lead to saving small amounts, and small savings can lead to large savings amounts over time.

It is a habit of savings that is a progression from “micro” to large that can help make a country great.

Crypto, more specifically stable bonds and coins can fill this role. With crypto a saver can invest micro amounts on a regular basis.

To this end, companies like Etherfuse can provide stable short-term government bonds and stable coins denominated in US dollar, Mexican peso, Brazilian Real, Euro, and UK pounds to savers for as little as $1.

With Etherfuse’s products all sorts of people can start regular savings programs in US, Brazil, Mexico, Europe, and the UK no matter how limited or great their funds are at present.

In the end, governments must wake up and find ways to bring more people into the savings game, if they want to be great.

Crypto is a solution and it should be embraced.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

The last post suggested weakness in the US dollar was forthcoming. Factors noted were:

· Excessive borrowing by the US government.

· The risk of losing Federal Reserve Independence.

· A forced restructuring of US bonds held by foreigners, also known as the possible Mara Lago Accord.

· Rumors of a tax on foreigners buying bonds.

· A loss of “Good Faith” from countries that hold US debt.

These are all valid reasons for confidence in the US dollar to decline, for its value to go down.

More than a few people cited disagreements with this view, citing the US dollar’s position as the global reserve currency as the thing that will allow it to keep its value. They thought the idea was crazy.

Regarding US dollar reserve status, there is no disagreement here. Also, the prediction was never for the US Dollar to melt down. Perhaps they took it wrong. The US dollar is not heading for a currency crisis, a violent move downwards.

But few can claim the US dollar is going up in value.

A US dollar that is unlikely to go up creates a trading strategy that can be very attractive called the “Carry Trade”. A carry trade is based on interest rate differences between bonds or currencies, where the interest difference produces a regular stream of income.

When an investor engages in a carry trade, the interest difference between borrowing and investing determines the return. If nothing happens, nothing changes, it is a steady return. This is why the Carry Trade is called the “Trade of nothing happening”.

It is like being a student and getting a student loan that carries a low interest rate. Instead of paying for college, you might invest it in a higher yielding asset or an asset that generates a good return like stocks, or crypto, or high yielding bonds. The difference between what you pay for the student loan (low interest rate) and what you get on the investment (higher interest rate) is the carry.

Once again, if nothing happens, that is, the exchange rate does not change a lot (US dollar up in value) or changes by less than the interest rate difference, the trade is profitable. Even better, if an investor borrows in US dollars and invests in a higher yielding vehicle, and the US dollar goes down in value the investment return is increased when that borrowing is paid off.

Right now, US interest rates versus many emerging market interest rates are low, and the dollar does not seem to be showing possible strength. For investors with a certain risk tolerance, it may make sense to borrow money in something like the US dollar or another low-interest rate vehicle and invest that borrowed money at a higher rate.

Such trades are normally used by wealthy or institutional investors. Crypto is transforming this by offering vehicles to create carry trades for small amounts of capital. Thanks to crypto and blockchain the carry trade is no longer only for the wealthy or big institutions.

In the end, the ideal trade is when the currency an investor borrows in stays stable or goes down. If it goes down, the amount of money from the interest bearing side that has to be paid back is less and the investment return is enhanced.

Now back to the dollar. Whatever you say about the US dollar, it doesn’t seem probable it is increasing in value. Unchanged to down is a better bet. If this is the case, perhaps the US dollar, be it crypto of fiat, is the right currency to fund a carry trade.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

“Core and explore” is an investment strategy involving one stable yield bearing asset, or assets, and a growthier asset class. In a “core and explore” strategy you get paid in yield while your “growth” or “explore” asset goes after capital appreciation. In short, the “core” asset is your base and the “explore” an aggressive pursuit of return.

“Core and explore” can also be called “yield and growth”, and it is perfect for a portfolio of crypto and tokenized sovereign bonds.

In this mix, crypto is the growth asset, and tokenized bonds are the yield assets. Crypto is a growth asset because it has similar characteristics to stocks, the classic growth asset. Stock prices normally go up in line with the growth in earnings and/or cash flow. They can achieve this growth a couple of ways.

First, a company may sell more of an existing product in an existing or new market.

Second, a company may generate sales by developing a new product, or a new use for an existing product.

Crypto fits with both of these growth drivers. First, crypto demand is growing in new markets and countries worldwide. Second, crypto can facilitate small transactions, giving it a huge market in terms of people to grow. Finally, crypto is tapping into new uses from payments to investments, driving demand and growth.

Thus, given crypto’s growth attributes, it is perfect for the “explore” portion of a “core and explore” strategy

Regarding the “core” portion, tokenized sovereign bonds are the best expression. Sovereign bonds are government obligations with the full faith and paying power of a government behind them, decreasing the likelihood that an investor will not be paid back. At the same time, tokenized sovereign bonds can generate an annual yield of between 2 and 13%, providing a stable yield paying asset a “core and explore” strategy needs

What bonds are in the “core” portion and how many is a decision an investor must make. This decision must take into consideration a combination of financial needs and risk tolerance.

The crypto portion of the strategy can be solo exposure to Bitcoin, Ether, Solana or another cryptocurrency. Or it can be a combination of a few. Some investors may see Ether down over 40% year to date and conclude the recovery potential is big enough to warrant inclusion as the “explore” asset. Some may view the “grand daddy” status of Bitcoin, down about 12% year to date, as the best choice for the “explore” portion. Perhaps a combination of the two, or one or two more. Diversification is a sound strategy in both the “core” and “explore” parts of a portfolio.

The next question is the mix of assets. A typical mix could range between 50/50 to 20/80 or 80/20.

Year to date crypto has gotten hit and there could be more downside, so it may be a good idea to dial crypto exposure back, for now. A dialed back crypto exposure could be a portfolio with 30% crypto and 70% tokenized sovereign bonds.

In the end, a “core and explore” strategy with a stable portion and a growth portion makes sense. However, the exact composition must be in line with an investors risk tolerance and investment horizon.

As exciting as this strategy is, there is no one size fits all.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

The US economy strives to become more competitive internationally in trade and investment. There are two ways to achieve this goal; apply tariffs, raising the cost of imported goods to encourage more US manufacturing and exports. Or, devalue the US dollar, so US goods cost less in overseas markets.

So far, the US has chosen tariffs , and they are being used as a bully club.

But hold on a moment, all the noise around tariffs caused the dollar to strengthen, which is what the US does not want. The US dollar must go down in value for the US to become more competitive, not up. What gives?

As strange as it seems, there may be a strategy to this tariff madness, the Mara Lago Accord, a new international currency agreement the US is talking about. The Mara Lago Accord’s goal would be to convince China, Japan, Germany, France, and the UK to agree to jointly devalue the US dollar, make it cheaper.

In other words, do a favor for the US and its economy.

A similar accord happened in 1985, the New York Plaza Accord. At that time, on the back of strong relationships, the US persuaded Britain, Japan, Germany, and France to jointly devalue the US dollar.

It seems logical that the only way countries like China, Japan, Germany, France and the UK could be convinced to take the economic pain of an accord to help the US become more competitive is if trust was abundant.

Well, given the US backing away from the Ukraine and NATO, cozying up to Russia, and the sloppy messaging on tariffs, trust is not abundant. It is a stretch to think Europe is going to trust the US right now.

The same goes for China. Given the aggressive tone on tariffs, it is hard to believe China will have enough trust to sign on to an accord that weakens the US dollar and benefits the US.

Perhaps the US should change their tone away from bullying. After all, bullies are hard to trust.

But if you listen to Treasury Secretary Scott Bessant, bullying may be the right strategy. Bullying, so the thinking goes, may bring the allies to the negotiating table.

With the negotiating table in mind, the Treasury secretary seems to be crafting a proposal, a proposal hinting at a tiered list of US alliances.

The idea is for other governments to put themselves into one of three categories friend, foe, or adjacent player. Friends would get military protection and tariff relief, but must embrace the currency accord, a weaker US dollar. Foes and adjacent players may still get bullied but be eligible for transnational deals.

It is kind of like choosing between membership plans at Costco.

So, what might this mean for investing in bonds?

First, it means favoring short-maturity bonds. As uncertainty grows it pays to be in short maturity.

Second, it might mean staying from US dollar bonds and moving towards Europe and higher yielding Latin American bonds, like Mexico and Brazil.

Putting the Mara Lago Accord aside, there are many things that can weaken the US dollar, and wreck investment returns: a government shutdown, economic growth slowing, and lower US interest rates to name a few.

European economic growth is on the upswing with its newfound defense spending, the Euro is going up, and interest rates will probably stay high.

Mexico has been threatened by tariffs, but the currency has held pretty steady

Brazil has long been challenged economically due to high government spending, but at minimum things are not getting worse.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

The European Union is united as it has ever been since the US hinted at cutting them loose from defense support. Thus it is clear that Europe is re-arming, and spending will be in the trillions of Euros.

The European economy has been struggling, and defense spending will help revive it. At the same time, Europe can allow interest rates to go up because they have inflation at a moderate level. In the end, trillions of dollars of spending will stimulate economic growth and take interest rates higher

Not all countries are positioned like Europe to get this type of growth boost. Europe is in a unique position.

Just recently it looked like the Euro was going to weaken to parity with the US dollar. Now it is 1.07 and showing upwards momentum. It can go higher.

Higher interest rates, a moderate inflation rate of 2.4% (a rate many would dream of), and more defense spending that will drive the economy, should support short-term Euro bond exposure.

Boosting defense spending has been talked about for some time, and many smart people got this wrong, saying Europe will never allow fiscal budgets to throw caution to the wind for defense spending, especially in a country like Germany.

Well, this was naive.

Many commented that Germany would never break their firm government spending rules for defense

Well, the new Chancellor-in-waiting Fredrich Merz put that idea to rest by convincing the other German parties to agree to exempt defense and security outlays from fiscal spending limits. They will even amend the constitution to allow for more spending on defense.

Germany is not the only player entering this game. A new Europe wide multilateral development bank is in talks with the US and other governments to push for a massive security spending boost in Europe. The bank will issue AAA bonds backed by shareholder nations to rapidly invest in defense procurement.

Increased defense spending in Europe is for real, and already being reflected in European capital markets.

The 10 year German bond hit a 15 month high, recording its biggest jump in yield since March 1990, months after the Berlin wall fell

The French 10 year French hit a 7 week high.

The prospect of increased defense spending sent the European stock index STOXX 50 up 1.3% the day after US tariffs were announced.

Even more surprising and a confirmation of the growth that can come from defense spending, the German stock market is up 3% in one day.

Money is flowing into Europe in both stocks and bonds.

New financing is coming, and the US looks ready to help with the financing.

This is the early stage of this new defense spending cycle and there is more to go.

So, in conclusion, when comparing Euro to the US, the Euro seems better at present.

US economic growth is in question until more is known about tariffs, and recent jobs numbers do not show economic strength.

Euro bonds look good for now.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

Selling a currency short, or any security for that matter, can be a good strategy to enhance investment returns. You go short, the security goes down, you make money. Companies like Etherfuse offer this product in currencies and bonds to a wide range of investors.

Given US tariffs and all the volatility being created, there are probably some good short selling opportunities at present. The first one that comes to mind is shorting CETES or the Mexican peso. Mexico IS getting hit with tariffs and that is not good for their currency.

Prior to the tariff announcement, the mere mention of tariffs sent the peso down in value

Now, tariffs are here. Should an investor short the Peso against the US dollar (bet the peso goes down in value versus the US dollar)?

This is a tempting trade. Mexico has been lowering interest rates and tariffs are bad, but if we look closer it may not be a great idea.

First, tariffs are here, and they are inflationary for the US economy. The longer they are in place, the more inflation in the US. As inflation goes up and stays up, the attractiveness of the US dollar goes down.

This may take some time, but higher inflation will impair US dollar value, making the Mexican peso look less bad, not great, just less bad.

The key questions are how far the peso can go down and how long will that take.

If you buy US dollar tokenized bonds from a company like Etherfuse, you get an annual yield of about 4.17%. If you buy CETES in Mexico in local currency you get a 7.7% annual yield.

One unit of Mexican currency gets you 3.5% more yield. This is significant. A higher interest rates on pesos protects against peso weakness versus the US dollar.

Based on this, the Mexican peso must weaken 3.5% to make the short trade profitable trade on an annual basis.

On the day of tariff announcement, the peso weakened 2% and hit a low of minus 2.7%.

Even the worst price of the day on the US dollar versus Mexican peso the day of tariffs would not have made it a profitable trade. It did not even get close to the -3.5% needed for a profitable short peso, long US dollar.

The key for a good short currency trade, or any trade for that matter, is momentum. The investment price must move quickly, gap quickly, power through support levels. The peso doesn’t seem to have the gas to get there.

It seems there has been too much time for investors to make their conclusions and act.

On the face of it, a short peso trade seems a good idea, with tariffs and everything. But the Mexican economy may be more stable than most think, and the peso less in danger of going down in value.

Short-term long Mexican CETES still seem to make sense given the yield different with the US dollar, despite all the tariff noise.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

The US dollar has weakened by about 6% versus the Brazilian Real year-to-date. Against the Mexican peso, the US dollar is down 2%. Against the Euro, and UK pound it is unchanged. Finally, the US dollar index DXY, the value of the US dollar versus a range of currencies, is down 3%.

The US dollar is weak.

Intriguing is that Brazil, Mexico, and Europe are US tariff targets, and US tariff threats should create weakness.

This is not happening.

Is stability in the real, peso, and euro versus the US dollar expressing strength in these foreign countries and currencies? Is it that no one believes tariffs are going to come about? Or is it investor concern about the trend of the US dollar?

Evidence supports concern about the US dollar’ s future trend.

First, DOGE is reducing US government costs, which long-term could strengthen confidence in the USD. However, so far savings are small, and many actions are being legally contested.

As of now, DOGE is not building confidence in the US dollar.

Second, there is a campaign to raise the US debt ceiling, increasing the amount of money the US government can borrow, even to an unlimited amount. Given the amount of debt at present, and the huge interest costs associated with that debt, investors are concerned whether or not the US can afford more interest payments.

Adding debt onto an already large amount is not a confidence booster for the US dollar

Third, there is a talk about a thing called the Mara Lago Accord. It is complicated to explain but in short. It would be an agreement among multiple nations to weaken the US dollar. A weaker dollar would allow for more US exports. More exports would start to correct the trade imbalance, deficit, the US buying more value of goods than selling.

In short, the US dollar is too strong to remedy present trade imbalances. It needs a new accord.

Finally, there is a risk that the US government will shut down March 16 due to financing concerns.

So, budget cuts light of expectations, the US government pushing for more borrowing ability, rumors of a drastic policy to weaken the dollar, and the possibility of a US shutdown all are weak points for the US dollar.

Given the possible downward trend in the US dollar, it can make sense to start investing in high yielding non-US bonds.

Etherfuse Mexican and Brazilian short-term bonds yield more than the US

Mexico about 3.3% and Brazil about 9%.

Investing in foreign short-term debt is a good way to avoid the pain of possible US dollar weakness.

In the end, it is a case of “dollar beware”.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

When President Trump won the US election, the euro fell, and it looked like it was heading to 1 to 1 or parity with the US dollar. Tariff fears were hammering economic sentiment. Political uncertainty was present; France was in the middle of political crisis and Germany was heading to a contentious election.

Add to that very low interest rates, meaning you received little investment return on an asset that had political risk, and it is astonishing the euro bounced off its post-US election bottom. These forces should have taken the Euro down to parity, and perhaps beyond.

But they didn’t.

Euro resilience can be explained by improving economic and stock market sentiment in Germany, of all places. Pre-its election, Germany’s February sentiment index rose 6.2 points from January to February, hitting its highest level in seven months. After a stumble post the election of President Trump, the German stock market raced ahead, outperforming the US market by double digits from the US election to now.

Any German economic improvement will support the Euro. After all, Germany is the Euro’s largest economy.

Right now, Germany is positioned to further help the Euro trajectory medium term through Increased government spending and borrowing.

It seems strange that Germany has room to borrow and spend when major economies like France, the UK, and the US are facing fiscal uncertainties.

But they do.

German debt is only 69% of GDP, and there is a debt brake enshrined in the constitution that the deficit is limited to .3% of GDP per year. This spending limit can be relaxed during a time of emergency, which happened during COVID.

So, the question is …Is this a time of emergency?

Many in Germany will say yes.

Here’s why.

There is infrastructure that needs to be replaced for Germany to continue being an economic powerhouse.

The economy must be strong to stave off the tariffs from the US.

The population is ticked off at lackluster economic growth.

More money must be spent on defense since the US is backing away from financial commitments, putting more responsibility on Europe’ shoulders.

Tariffs, loss of defense funding, and an upset population combined could define an emergency.

Short-term there are still strong headwinds against the euro going up in value, but the prospects of Germany economic growth will probably keep the euro from nearing parity.

So, in conclusion, there seems to be a limited downside, and possible medium-term upside in the euro at present.

Given the limited downside and potential appreciation, now may be the time to take exposure to European bonds. The interest rate is not great, but the currency should hold its value and there the upside from Germany’s next potential economic miracle.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

The latest UK government ten-year bond sales saw the highest demand from investors ever, beating the previous month, which was the previous highest demand ever.

This demand has created volatility in bond yields. The UK ten year recently spiked to 5% and then went back to 4.5% on strong demand. UK Yields were near multi-year highs, and investors wanted them.

Further to demand, a wide range of investors were buyers. Private retail investment was the highest in four years.

So why are investors clamoring for UK bonds?

And should we jump into this trade?

Versus the US and Europe, the UK is poised for two more rate cuts in 2025.

The number of rate cuts in the US and Europe is less certain.

In the US inflation is running hot, and in Europe interest rates are already low, both dynamics that mitigate interest rate cuts.

When we look at the UK versus the US, UK rate cuts make sense.

The US has 4.5% interest rates on its ten year bond and economic growth was 3%. The UK’s economy is barely showing growth and has 4.5% rates. With such a gap between economic growth rates, interest rates should not be equal.

A more concerning reason for UK interest rates going down is the possibility of a UK recession in 2025. Economic growth was -.1% in 4Q 2024. If it hits negative in 1Q 25, it’s a recession. In recessions, it’s a good bet that governments will lower interest rates to try and jolt economic growth back to life,

Along with anticipated lower interest rates, tax treatment of UK bonds may be another reason for strong investor demand. In the UK investors are only taxed on the interest received, the coupon. Capital gains due to lower interest rates are not taxed. Thus, most bonds in the UK have low coupons (allowing for a low tax).

Adding fuel to the fire, low coupon bonds are more sensitive to interest rates than high coupon bonds. Low coupon bonds move more when rates decline.

But can the UK lower interest rates?

Economic growth, and interest rates differences with the US and UK say they can, but inflation may say something else. In January, UK inflation climbed to the highest level in 10 months, boosted by the cost of airfares, motor fuel, food and the imposition of value-added tax on private school fees.

The actual numbers were: Consumer prices up 3% from a year earlier, accelerating from a 2.5% pace in December, above the 2.8% forecast by economists and the Bank of England.

After these numbers, it didn’t take traders long to respond. Consensus is now for two more quarter-point reductions this year, a significant retreat since last week, the week of strong buying.

It is hard for an economy like the UK to maintain high interest rates when its bond yield is similar to the US at 4.5%, but growth is barely 1% versus 3% in the US.

Europe realized economic growth is anemic and slashed rates way below the UK.

So, in the end, rates will probably go down in the UK in 2025.

The key question will be how many times and by how much in total.

Investors, both retail and institutional, are rooting for lower rates, as seen in the recent bond issuance.

They may get them.

But a key question is the currency. What will happen with the pound? It will probably go down. This is not good for overall return.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.