Frontier Preview for the Week of May 11, 2025

May 11, 2025

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

Frontier FX was mixed last week even though the dollar was mostly firmer against the majors. GHC, UYU, and UAH outperformed while RSD, JMD, and CRC underperformed. The dollar mounted a recovery on the back of solid data and a hawkish Fed, as well as increased optimism regarding the trade war. Those themes will be tested this week with the release of key inflation and retail sales data, as well as potential disappointment regarding a U.S.-China trade deal after a weekend of positive comments.

EUROPE/MIDDLE EAST/AFRICA

Serbia reports April CPI data Monday. Headline is expected to fall a tick to 4.3% y/y. If so, it would remain just within the 1.5-4.5% target range. The central bank kept rates steady at 5.75% last week, as expected, and said that “Inflation at home greatly depends on developments in global commodity and financial markets which are currently highly volatile amid uncertainty related to trade policies of leading global economies.” Next meeting is June 12 and another hold seems likely then.

Romania reports April CPI data Tuesday. Headline is expected at 4.80% y/y vs. 4.86% in March. If so, it would be the lowest since October but still above the 1-4% target range. The central bank then meets Friday and is expected to keep rates steady at 6.5%. At the last meeting April 7, the bank kept rates steady “in light of the particularly elevated uncertainty.” Since then, Romanian assets have suffered from political uncertainty. Indeed, political turbulence suggests the risk of a policy rate hike cannot be ruled out. Far-right party leader George Simion will now face-off against Nicuşor Dan, the pro-EU centrist mayor of Bucharest in a presidential runoff scheduled for May 18. Simion is the favorite to win. Romania cannot afford to scare off foreign investors with political instability as the country has a huge current account deficit in excess of -8% of GDP.

Nigeria reports April CPI data Friday. Headline is expected at 22.2% y/y vs. 24.2% in March. If so, it would be the lowest since December. At the last meeting February 20, the central bank kept rates steady for the first time since March 2022. Over that time, the bank hiked rates from 11.50% to 27.50% currently even as inflation rose from 15.9% y/y in March 2022 to peak at 34.6% y/y in November 2024. Next meeting is May 20 and if inflation continues to cool, another hold seems likely.

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