The GBP DKK exchange rate was able to record a notable gain on Tuesday thanks to a positive response to UK inflation rate data, despite underlying ‘Brexit’ concerns.
The Danish Krone has been middling overall, owing to a severe data shortage and recent fluctuations in the price of crude oil.
Optimism in Sterling Rises after Higher-than-Expected Inflation Rate Result
The Pound gradually appreciated against the Danish Krone during Tuesday’s trading session, although starting movements created the impression that the day would be another poor one for the Pound overall.
The big news of the day was that annual UK inflation for September had risen from 0.6% to 1%; this exceeded forecasts of a rise to 0.8%. In the immediate aftermath, the Pound fell slightly, though subsequently rose against the Krone and other peers over the course of the day.
However, while the increase in inflation may prevent the Bank of England (BoE) from cutting rates in the short term, escalating price pressures come with their own issues.
In particular, the fear was voiced by the Institute of Fiscal Studies that;
‘Previously, higher inflation was a risk to the public finances, increasing cash spending on benefits. Now the risk is borne by low-income households: unless policy changes higher inflation will reduce their real incomes’.
Danish Krone Hung Out to Dry on Lack of Domestic Data
As the last Danish data was released on October 10
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, covering a falling trade surplus for August and flat level of national inflation, the Krone was left vulnerable to market shocks on Tuesday, which came mainly from the Eurozone and commodity prices.
In the former case, a similar lack of major data from the Eurozone led the pegged currency to slide, dragging the Krone down with it, while in oil news, the price of Brent crude slipped down to $51.40 per barrel, showing a gradual movement away from the high above $53 seen earlier in the month.
GBP/DKK Exchange Rate Forecast
For the remainder of the week, Pound/Danish Krone exchange rate movement may occur as a result of Wednesday’s UK jobless claims, unemployment and earnings results, as well as Thursday’s UK retail sales figures.
From Denmark, input is likely to come from Thursday’s retail sales and Friday’s consumer confidence results.
UK claims in September are expected to have fallen, while for August’s unemployment rate, a converse rise from 4.9% to 5% is forecast. For the crucial UK earnings figures, a drop is expected with bonuses, but a slight rise has been forecast without. Annual UK retail sales on the year in September are expected to fall.
With Denmark’s results, a retail sales rise is forecast for September on the month and year, while consumer confidence in October is also forecast to increase from 1.8 to 2.9.