The Pound Danish Krone exchange rate has rallied spectacularly today on the news that the Bank of England will not be slashing its benchmark rate this month.
Previously ramping down from the early week political relief rally, Sterling found support even before the Bank of England’s (BoE) announcement as recently appointed Chancellor of the Exchequer Philip Hammond made it clear that no emergency ‘Brexit’ budget would be enacted.
Recent Danish ecostats have printed fairly well and mostly exceeded forecasts, however, with the Danish Krone pegged to the Euro and the lack of seriously impactful Danish data, the pairing’s movement directly mirrored that of GBP/EUR over the past week.
Currently the Pound Danish Krone exchange rate trades at 8.9010 after rallying approximately 1.25% over the course of Thursday’s session.
Sterling (GBP) Restarts its Rally on Philip Hammonds Appointment as Finance Minister, BoE Holding Rates
The Pound first saw a marked increase on Monday as the Tory party leadership contest was reduced to just a one horse race on the news that Andrea Leadsom would be dropping out.
The Pound witnessed substantial gains by the end of Monday’s session and the currency’s rally continued through until late Wednesday afternoon as fears over the Bank of England’s expected rate cut began to take over. However, those fears have now been proven unfounded today as the BoE decided to keep rates on hold at 8 votes to 1.
The initial rally was aided by the confirmation of Theresa May’s accession as Prime Minister of the United Kingdom. She was sworn in on Wednesday evening and one of her first moves was to appoint Boris Johnson as foreign secretary, an act that left many political pundits scratching their heads.
May was decidedly the favourite for the top spot. One-by-one the pro-‘Leave’ leadership contenders dropped out of the race until just Andrea Leadsom and Theresa May remained. After struggling to weather the media scrutiny, Leadsom conceded to May and left the premiership wide open for the former Home Secretary.
The appointment of Philip Hammond to the position of Chancellor of the Exchequer saw the Pound rally on comments that there were no plans for an implementation of the emergency ‘Brexit’ budget. Further confidence in post-Brexit Britain was stoked due to Hammond’s distancing of himself from George Osborne’s austerity measures.
Lack of Danish Data Sees DKK Mirror Euro Movement 1:1
With little in the way of ecostats from Denmark to greatly effect Krone movement, the currency has mirrored the Euro’s trends over the past week.
On Monday the Danish current account report posted a marked increase compared to forecasts and inflation edged closer to a more reasonable figure at 0.3%, up from 0.1%. However, these reports did little to affect movement in the Danish Krone and as a result, DKK continued to move with the Euro.
Uncertainty is still awash in the Eurozone and the post-Brexit European Union at large. The looming Italian banking crisis continues to tower over the Bloc’s third-biggest economy with Italian Prime Minister Matteo Renzi eying up a taxpayer-funded public bailout. European banking guidelines set forth in January prohibit such a bailout after the tax-paying public were left to foot the bill of the 2008 world banking crisis.
Further EU woes came from a group of Eurozone finance ministers warning that the Brexit has hit European growth prospects.
Lack of Upcoming Data Releases Leaves Sentiment as Main Driving Force for GBP/DKK
Only low impact UK data is set for release at the end of this week. Construction output for May, both year-on-year and month-on-month, is forecast to fall but the data is unlikely to cause any movement for the Pound as the UK’s construction sector is by no means a key industry.
The Danish Krone could see some movement if the European Central Bank survey of professional forecasters paints a hawkish picture for the Eurozone. However it is unlikely with the current circumstances, i.e. the Italian banking crisis, subdued EU growth, the ongoing Brexit and growing Euroscepticism within the member states.