Frontier Preview for the Week of March 2, 2025

March 02, 2025

Win Thin

Frontier FX was mostly weaker last week as the dollar mounted a broad-based recovery as risk off impulses dominated. KZT, LKR, and GHC outperformed while RSD, VND, and HRK underperformed. The global outlook soured after President Trump confirmed that tariffs would go into effect as planned this week. Furthermore, risk off sentiment was boosted by the contentious Ukraine-U.S. meeting. This week brings key U.S. data that could go a long way toward allaying U.S. recession fears. Either way, the dollar smile is likely to remain in place while Frontier FX remains vulnerable.

EUROPE/MIDDLE EAST/AFRICA

Kazakhstan reports February CPI data Monday. Headline is expected to fall a tick to 8.8% y/y. If so, headline would decelerate for the first time since November but would remain well above the 5% target. The central bank began its tightening cycle with a 100 bp hike to 15.25% in November 2024 but then kept policy steady at its January 17 meeting. The central bank then meets Friday and is expected to keep rates steady at 15.25%. If inflation continues to accelerate, a hawkish surprise is possible then.

ASIA

Pakistan reports February CPI data Monday. Headline is expected at 2.2% y/y vs. 2.4% in January. If so, it would be the lowest reading in data going back to 2017 and would move further below the 6% target. At the last meeting January 27, the central bank cut rates 100 bp to 12.0% and Governor Ahmad said that falling inflation means “we have ample room to cut rates.” He added that “Our real interest rates in the short term are quite positive and that is providing us with flexibility for rate cuts.” Next policy meeting is March 10 and another 100 bp cut to 11.0% seems likely if inflation continues to fall, with risks of a dovish surprise.

Vietnam reports February CPI data Thursday. Headline is expected at 3.20% y/y vs. 3.63% in January. If so, it would decelerate for the first time since November and move 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.

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