The Danish Krone (DKK) exchange rate followed the Euro (EUR) lower against the Pound Sterling (GBP) on Wednesday as the UK currency continued to receive support from the previous sessions Service sector activity data.
Trade was relatively quiet on Wednesday as many market participants were still on Easter breaks and as economists focused upon upcoming Federal Reserve meeting minutes for indications as to what the central banks next policy move will be. Weaker than forecast jobs data released last Friday has caused economists to raise their bets that policy makers will not raise interest rates until later in the year.
The GBP/DKK exchange rate advanced more than 0.90% in the European session allowing the currency pair to achieve a session high of 10.3280.
Optimism over the UK economy remains high ahead of the May 7 general election. Recent PMI reports have all beaten expectations, and a report released earlier in Wednesday’s session showed that new car sales reached a record high in March.
Car dealers across the country sold 492,774 new cars last month, a rise of 6% compared to the same period in 2014. The strong figure meant that it was not only the best March on record, but also the best monthly performance since the UK switched its number plate system in 1999. Vehicle sales are a major barometer of an economy’s performance.
The car registrations data added to Tuesday’s Service sector PMI showing activity in the UK’s dominant sector increased at its strongest pace since the middle of 2014. The data has increased expectations that the UK economy grew strongly in the first quarter of 2015.
The Danish Krone was also under pressure from concerns that the Scandinavian nation may be about to experience another property bubble. It has not been long since the nation emerged from its last property bust so economists are worried about a repeat. An unprecedented amount of monetary stimuli has entered the Danish economy in recent weeks.
‘We do see signs that do make a supervisor worry. That is why I am preaching the gospel that the credit institutions need to take caution now. Our primary concern is, where will this take the property market here and especially around the larger cities. We already see prices picking up rapidly especially in Copenhagen. Can we keep that on a sustainable path?’ said Ulrik Noedgaard from Denmarks Financial Supervisory Authority.
The Danish Krone could experience further movement on Thursday due to Balance of Trade and Current Account data. Friday will see the release of inflation and industrial production data.