Mexico’s core inflation came in at 0.38% in March. This was below forecasts of 0.4%.
The update compares the actual figure with the expected figure. No further data was provided in the text.
The report is attributed to the FXStreet Team. The team is described as economic journalists and FX specialists who produce and oversee FXStreet content.
The March core inflation print of 0.38% came in just shy of the 0.4% we were all watching. This small miss is significant because it reinforces the view that disinflation in Mexico is on track. It gives Banxico, Mexico’s central bank, a green light to continue its rate-cutting cycle from the current 9.00% level.
This data should put modest pressure on the Mexican Peso in the near term. We should consider strategies that benefit from a weaker peso, such as buying call options on the USD/MXN pair. With the spot rate hovering near 17.50, targeting strikes in the 17.90-18.10 range for the coming months could provide good value.
For interest rate traders, this inflation reading makes bets on lower rates more attractive. We can express this view by positioning in TIIE interest rate swaps, anticipating that the market will price in a faster pace of cuts. This is similar to the pattern we saw back in early 2024 when the central bank began its easing cycle after inflation showed consistent signs of cooling.
Lower interest rates are also a positive signal for Mexican stocks. This environment makes it cheaper for companies to borrow and invest, potentially boosting the IPC stock index. We believe buying call options on broad Mexico-focused ETFs is a straightforward way to gain exposure to this potential upside.
The key will be to watch for confirmation in the next round of data and in Banxico’s communications. While the direction seems set for lower rates and a softer peso, the pace is still uncertain. This suggests that implied volatility in peso options might decrease, as the central bank is now less likely to deliver a hawkish surprise at its next meeting.
