The current week has seen the Pound Sterling to Danish Krone (GBP/DKK) exchange rate make stable progress towards a high of 10.1732, although the week began with a dramatic dive to 10.0529.
The biggest news of the week for the Pound has been the Bank of England (BoE) Interest Rate Decision and the more important minutes, released simultaneously. As many investors and economists had predicted, the UK interest rate remained unchanged, while the minutes indicated caution with regard to the future of the UK economy. In the wake of the announcement, many investors were highly pessimistic of when the next interest rate revision would occur, although according to Capital Economics Chief UK Economist Vicky Redwood: ‘Financial markets have probably gone too far in again pushing back expectations of the first rate hike until the start of 2017. But a rise before Q2 of next year still seems unlikely to us’.
In a similar story for the Euro (and by extension, the Danish Krone), the European Central Bank (ECB) Account of the Monetary Policy Meeting revealed that caution was also prevalent for Eurozone policymakers, as the account warned that problems affecting emerging-market currencies were making it difficult to determine what direction global markets would take in the future. Crucially, the account stated that ‘Although it was still premature to conclude whether these developments could have a lasting impact on Euro area output and … inflation, downside risks had intensified’.
For the remainder of the week, Pound Sterling/Danish Krone exchange rate movement may occur as a result of the US Fed Minutes from their September 16
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Federal Open Market Committee (FOMC) Meeting, the UK Trade figures for August and the Danish Balance of Trade and Current Account figures for the same period.
Like their previous iterations, this month’s Fed minutes will cover the reasons behind last month’s US interest rate freeze at 0.25%, as well as the opinions (at the time) of Fed members on whether or not they through an interest rate hike would be appropriate in the remainder of this year. However, since last month’s decision, Fed policymakers have spoken out on when they think an interest rate hike increase should occur. In addition to this, last week’s Change in Non-Farm Payrolls shortfall seriously damaged optimism regarding a positive rate decision taking place this year, so the impact of these results when announced this evening remains to be seen.
Tomorrow’s UK Trade Balance figures have all been pessimistically forecast, with widening deficits predicted across the board. By contrast, Denmark’s Balance of Trade and Current Account results have positive expectations assigned to them, therefore a Sterling downtrend into the weekend is a distinct possibility.