the-market

"Skate to Where the Puck is Going!"

Donald ElefsonMarket AnalystFebruary 3, 2025

Hockey great Wayne Gretzky had a saying "skate to where the puck is going to be, not where it has been".

Right now, currencies are like a hockey puck travelling across the ice. No one knows where they are going, but we do know the direction.

Down.

US tariffs on Mexico and Canada set these currency moves in motion. Now, the US has its sights set on Europe.

China is still an unknown.

Times like these can provide good entry points for savings portfolios.

As this crisis, and yes this is mild crisis, unfolds, impact will be expressed in currencies and yields.

The US dollar was strong going into this fight, and it has gotten stronger. A stronger US dollar means non-dollar currencies are getting weaker. As example, the Euro is down about 2.4% from its level shortly before the tariff announcement; it went from 1.05 to 1.026. It could easily be heading towards parity, 1 to 1, another 2 plus percent loss for holders of Euro when compared to US dollar.

At some point in time, the Euro could be a buy. A Euro at parity or below? Great.

But not yet.

The most interesting currency is the Mexican peso.

Mexico retaliated to US tariffs and the situation could get ugly.

Going into this event Mexican CETES yielded about 4%-4.5% more than US Treasuries. Since the tariff announcement, the peso is down 2.63% and at its worst it was down 3.85%

So far, and yes, I know it is early days, the dollar-based return in Mexican peso has outpaced the US return. If the Peso stays below 21.93 (20.92 at present), there is still a gain being made by holders of peso bonds vs US bonds

But, Let's say the peso goes down to the point that the return from the time of tariff announcements is negative. That may be a good time to buy

Buying the peso cheaper with 8 plus percent yield is something to consider.

But, once again, now is not the time. The puck is not there.

As regards maturity of bonds to hold right now, short-term makes the most sense. And right now, US short-term treasuries are the place to be for both investing and collateral purposes. But there will be a time to move more into the Mexican peso and get a good yield.

Or into the Euro below parity with its stable economy.

But not yet.

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.

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.

Donald Elefson

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Donald Elefson

Market Analyst

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