Frontier Preview for the Week of June 1, 2025

June 01, 2025

Here's a look at the main drivers in Frontier Markets this week.

Frontier FX was mixed last week despite the ongoing tariff uncertainty. GHC, CRC, and KZT outperformed while JMD, VND, and RSD underperformed. We believe the dollar gains were exaggerated by skewed positioning, with weakness likely to resume this week as the dust settles. Key data this week should show that the U.S. economy is feeling the impact of the tariffs and tariff uncertainty. However, this backdrop is not supportive of risk assets and so we remain cautious on Frontier FX.

EUROPE/MIDDLE EAST/AFRICA

Kazakhstan reports May CPI data Monday. Headline is expected at 11.3% y/y vs. 10.7% in April. If so, it would be the highest since September 2023 and further above the 5% target. The central bank then meets Thursday. At the last meeting April 11, the bank kept rates steady at 16.5% after it delivered a hawkish surprise at the March meeting by hiking rates 125 bp to 16.5%. If inflation continues to accelerate, a hawkish surprise this week is possible.

ASIA

Pakistan reports May CPI data Monday. Headline is expected at 3.6% y/y vs. 0.3% in April. If so, it would be the highest since December but would remain well below the 6% target. At the last meeting May 5, State Bank of Pakistan delivered a dovish surprise and cut rates 100 bp to 11.0% vs. no change expected. It said that “heightened global uncertainty surrounding trade tariffs and geopolitical developments could pose challenges” for the economy. Next meeting is June 16 and if inflation accelerates sharply, a hold then seems likely.

Vietnam reports May CPI data Friday. Headline is expected at 3.20% y/y vs. 3.13% in March. If so, it would be the higher since January but would remain well 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.

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