Mexico’s seasonally adjusted consumer confidence index was 44.1 in March. It was 44.4 in the previous month.
This is a decrease of 0.3 points from the prior reading. The index remains below 50.
This slight dip in consumer confidence for March, from 44.4 to 44.1, suggests a potential cooling in the domestic economy. With Banxico holding its key interest rate at 11.0% last month, this data point may give the central bank reason to adopt a less hawkish tone. We should anticipate that any further signs of economic softness could weigh on the Mexican peso.
The peso has been remarkably strong, trading near 16.55 to the US dollar, but this shift in sentiment could trigger a reversal. We see an opportunity in buying out-of-the-money call options on USD/MXN futures, positioning for a move back toward the 17.00 level. We remember how quickly sentiment shifted in 2025 when US inflation data surprised to the upside, making the carry trade unwind rapidly.
For equity markets, this is a headwind for the benchmark IPC index, particularly for consumer-facing stocks. We should consider purchasing May or June put options on the EWW, the iShares MSCI Mexico ETF, as a direct way to position for a potential pullback. Implied volatility has been low, with the VIMEX index hovering around 18, making options relatively cheap at these levels.
This consumer data, combined with recent reports showing a slowdown in manufacturing orders from the United States, points to growing external and internal pressures. This environment is favorable for strategies that profit from increased price swings, regardless of direction. We are considering buying June straddles on EWW to capitalize on a potential rise in volatility over the next quarter.
