Frontier FX was mostly softer last week despite the dollar’s mixed performance against the majors. RSD, UAH, and BDT outperformed while KZT, UYU, and VND underperformed. The data this week are secondary, with markets instead focusing on the whether the Trump administration softens its tariff plans in the face of market turmoil. For now, they are showing no signs of backing down and so last week’s price action is likely to carry over into this week. For FX, that means JPY and CHF are likely to continue outperforming at the expense of the growth-oriented majors and Frontier FX as global growth concerns mount.
EUROPE/MIDDLE EAST/AFRICA
Romania central bank meets Monday and is expected to keep rates steady at 6.5%. At the last meeting February 14, the bank kept rates steady and Governor Isarescu said “We are prepared, of course, for capital outflows or more like decisions not to renew existing credit lines, a decline in inflows which would, of course, impact the FX market. We are ready to cover any shortfalls, but that’s why I say it’s not the time to consider a rate cut. In the current circumstances, it might sound like an invitation to weaken the currency.” March CPI data will be reported Friday. Headline is expected at 4.90% y/y vs. 5.02% in February. If so, it would remain well above the 1.5-3.5% target range.
Kenya central bank meets Tuesday and is expected to cut rates 50 bp to 10.25%. At the last meeting February 5, the central bank cut rates 50 bp to 10.75%. Governor Thugge said the cut was “supported by a low and stable core inflation, low energy prices inflation, and exchange rate stability” as well as expectations that inflation would remain below the 5% midpoint of the target range. March CPI accelerated for the fifth straight month to 3.6% y/y vs. 3.5% in February. It is the highest since September but remains well below the midpoint of the 2.5-7.5% target range. With inflation picking up, this could keep the bank cautious and limit it to a 25 bp cut.
Serbian central bank meets Thursday is expected to keep rates steady at 5.75%. It has since been on hold since the last 25 bp cut in September. At the last meeting March 13, the bank said “It is necessary to continue to exercise a cautious monetary policy stance. It is difficult to gauge the extent to which rising protectionism worldwide and the introduction of new tariffs will affect economic activity at home, and there is also the risk that blockades and protests could lead to the deferral of some investments and consumption.” March CPI data will be reported Friday. In February, headline fell a tick to 4.5% and puts it right at the top of the 1.5-4.5% target range.
Kazakhstan central bank meets Friday and is expected to keep rates steady at 16.5%. However, some analysts look for a 50 bp hike to 17.0%. At the last meeting March 7, the central bank delivered a hawkish surprise and hiked 125 bp to 16.5% vs. an expected hold. It noted that “Pressure on prices from the external sector has increased due to further acceleration of inflation in Russia” and raised its 2025 inflation forecast 10-12% vs. 6.5-8.5% previously. Since then, March headline came in higher than expected at 10.0% y/y vs. 9.4% in February and accelerated for the fourth straight month to the highest since November 2023 and moved further above the 5% target.
