Frontier FX was mixed last week despite broad dollar weakness against the majors. UAH, UYU, and TTD outperformed while MUR, BOB, and BND underperformed. This week will be key for global markets. Not only do we get reciprocal tariffs on Wednesday, but we also get important U.S. data throughout the week that culminates in the jobs report Friday. We believe the data will surprise to the upside, which would give the dollar a much-needed boost and keep downward pressure on Frontier FX.
EUROPE/MIDDLE EAST/AFRICA
Kenya reports March CPI data Monday. Last month, CPI came in at 3.5% y/y vs. 3.3% in January and remains well below the midpoint of the 2.5-7.5% target range. 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. Next meeting is April 8 and if inflation continues to pick up, it could keep the bank cautious and limit it to another 50 bp cut.
Kazakhstan reports March CPI data Tuesday. Headline came in higher than expected at 9.4% y/y in February. it accelerated for the third straight month to the highest since January 2024 and moved further above the 5% target. 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. The bank also lowered its 2025 growth forecast to 4.2-5.2% vs. 4.5-5.5% previously due to a poorer outlook for oil production. Next meeting is April 11 and if inflation continues to accelerate, another hike then seems likely.
ASIA
Pakistan reports March CPI data Tuesday. Headline is expected at 0.7% y/y vs. 1.5% in February. If so, it would be the lowest reading for data going back to 2017 and would move further below the 6% target. Yet at the last meeting March 10, State Bank of Pakistan delivered a hawkish surprise and kept rates steady at 12.0% vs. an expected 50 bp cut to 11.50%. It was the first hold since April 2024 as “The Committee noted that the impact of sizable earlier reduction in policy rate is now materializing.” The bank also warned that “Core inflation is still at an elevated level and is proving stickier than anticipated.” Next meeting is May 5 and if disinflation continues, the easing cycle could resume.
Vietnam reports March CPI data over the weekend. Headline came in at 2.91% y/y in February. It decelerated for the first time since November and moved further below the 4.5% target. The central bank has kept the policy rate at 4.5% since the last 50 bp cut in June 2023. However, the bank continues to rely on non-market policies such as deposit and lending rate caps and credit growth ceilings. This has led the IMF to push for further modernization of the monetary policy framework, as well as great flexibility in the exchange rate.
