The appeal of the Danish Krone was improved by the news that domestic consumer confidence had experienced a strong uptick in April. Climbing from 3.6 to 5.5, this suggested the sentiment within the Danish economy had improved strongly in the last month as market volatility and global uncertainty decreased. However, this was contrasted by a rather disappointing contraction in Retail Sales from 2.2% to -3.1% on the year, with the report somewhat undermining the appeal of the Krone.
Ahead of the weekend the GBP/DKK exchange rate was boosted strongly by comments from US President Barack Obama, who iterated his belief that the UK should vote to remain in the European Union. Investors gained confidence on the back of Obama’s warning that it could take up to ten years for the two countries to negotiate a new trade deal in the event of a ‘Brexit’, with markets betting that the warning had boosted the odds of a ‘Remain’ camp victory.
Demand for the Danish Krone was dented in the wake of the European Central Bank’s (ECB) April policy meeting. President Mario Draghi did not announce any further monetary loosening measures at this juncture, although he did repeat the suggestion that interest rates could potentially be cut further in future. While this dovish tone largely failed to convince markets, the Euro and (consequently the Krone) was further weakened by the latest raft of disappointing Eurozone PMIs. Consequently the GBP/DKK exchange rate climbed to a multi-week high of 9.5553 on Friday.
GBP/DKK Reached Seven-Week High despite GDP Disappointment
After a bullish start to the week confidence in the Pound slumped sharply in response to latest UK GDP report on Wednesday, as the domestic economy was shown to have slowed at the start of the year. GDP slipped from 0.6% to 0.4% on the quarter, with Chancellor George Osborne blaming the impact of recent ‘Brexit’ uncertainty. Market volatility in the early months of 2016 and the potential delaying of investment ahead of the June referendum formed a significant drag on momentum, with the bulk of the economy’s growth still driven by the service sector.
As GDP on the year remained steady at 2.1%, however, and concerns over the future of the Greek bailout heated up once again the GBP/DKK exchange rate rebounded rapidly, hitting a seven-week best of 9.6158. Nevertheless, with the Pound’s bullish run dented the pairing soon returned to a downtrend.
Danish Business Confidence proved rather more disappointing for the Krone, meanwhile, holding steady at -6 in April. This weaker showing helped to shore up the GBP/DKK currency pair on Thursday, particularly as an unimpressive German Consumer Price Index encouraged the odds of further ECB loosening to come.
Weaker Eurozone Data Predicted to Dent Krone
While a group of eight economists put out the view that the UK would be better off leaving the EU, investors appeared to remain of a more optimistic mind-set. However, if the UK GfK Consumer Confidence Survey for April demonstrates weakness or polls begin to show a narrowing of the ‘Remain’ camp’s lead the Pound could turn imminently bearish.
Friday’s Danish Unemployment Rate is unlikely to provoke any substantial change in the direction of the GBP/DKK exchange rate, with forecasts anticipating no change from 4.3%. Steady unemployment could shore up the appeal of the Krone, although the currency could equally see a fresh downtrend in response to the latest Eurozone data. Both the Eurozone’s April CPI and first quarter GDP are due for release, with weaker showings likely to soften sentiment towards the sensitive Krone.