The GBP/DKK has experienced a general uptrend this week, from a low of 10.5439 on Monday to a high of 10.6827 on Thursday.
The Paris attacks caused volatility in the GBP/DKK exchange rate as new security fears saw Denmark raise its threat level to ‘significantly heightened preparedness’. Although Danish officials have since said that their assessment of the threat to Denmark from extremism remains the same, the news that France will overshoot its EU budget as it increases spending on defence has seen other European countries considering similar strategies.
A speech on Wednesday by Bank of England (BoE) Deputy Governor Ben Broadbent turned out to be surprisingly hawkish, lending the Pound some strength. Broadbent suggested that inflation should not be the only factor the Monetary Policy Committee (MPC) takes into account when making interest rate decisions and highlighted that there are many different paths to reaching the target 2% rate of inflation. His comments helped set Pound Sterling on an uptrend against the Danish Krone.
However, the Pound then took a hit yesterday with the release of poor UK Retail Sales data which showed that monthly figures fell by more than expected while yearly growth dropped from 5.7% to 3.0%. The release caused a slump in the GBP/DKK exchange rate, with the pairing sliding 0.3% from a four-month high of 10.6827 to 10.6269.
UK financial data is due out later today which will highlight the extent of UK borrowing. Public Finances currently stand at 17.9 billion and an increase here would show that Public Sector spend is increasing at an unsustainable rate. Public Sector Net Borrowing for October is forecast at 5.3 billion, a drop of 3.3 billion on last month. Printing below last month’s rate of 8.6 billion will show that the UK is reducing its deficit and requires less money to fill financial gaps.
The Danish Consumer Confidence Index for November was out this morning, along with monthly and yearly sales figures. Consumer Confidence posted at 5.6, up 2.6 points on the previous month and beating the forecast score of 4. Year-on-Year (YoY) Retail Sales grew from 2.1% to 2.5%, although they didn’t quite meet expectations. Month-on-Month (MoM) Retail Sales rose to 0.5% from 0.1% in September.
Despite positive news from Denmark, the Krone is sliding against the Pound as investors brace for comments from European Central Bank (ECB) President Mario Draghi, who is speaking this morning on the final day of the Euro Finance Week conference. Early news suggests Draghi has highlighted the weakness in emerging markets, a weak Euro rebound and a lengthy recovery, as the three main risks the ECB needs to be aware of as it tries to hit inflation targets.
Two more ECB members, Peter Praet and Vitor Constâncio, are due to speak later today. Their comments have previously supported the need for additional monetary stimulus. Also due out today is the Eurozone Consumer Confidence Index, which is forecast to remain pessimistic at -7.5, only a slight improvement on the previous month’s -7.7.
The GBP/DKK exchange rate is currently trading between 10.6270 and 10.6800.