Frontier FX was mixed last week and reflected in part the dollar’s mixed performance against the majors. GHC, UAH, and VND outperformed while RSD, KZT, and JMD underperformed. We expect Chinese data this week to confirm that the trade war is having an impact on growth. Elsewhere, the Fed is expected to deliver a hawkish hold. In short, the global backdrop remains difficult for Frontier Markets.

EUROPE/MIDDLE EAST/AFRICA

Serbia central bank meets Friday and is expected to keep rates steady at 5.75%. It has since been on hold at 5.75% since the last 25 bp cut in September 2024. At the last meeting April 10, the bank noted that “Domestic inflation is still to a great extent dependent on developments on the global commodity and financial markets, which still cause concern due to uncertainty.” March headline inflation fell a tick to 4.4% and puts it just within the 1.5-4.5% target range.

ASIA

State Bank of Pakistan meets Monday and is expected to keep rates steady at 12.0%. However, a handful of analysts polled by Bloomberg look for a cut. At the last meeting March 10, bank 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.” Since then, April headline inflation came in at 0.3% y/y vs. 0.6% expected and 0.7% in March and is a new low for data dating back to 2017 and moves further below the 6% target. As such, we see some risks of a dovish surprise this week.

Vietnam reports April CPI data Tuesday. Headline is expected at 3.30% y/y vs. 3.13% in March. If so, it would remain well below the 4.5% target and yet 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.