A number of high-profile developments have helped the GBP DKK exchange rate recover from a near ten-week low to a two-week high of 8.66.
Pound Sterling Receives Brexit Boost; Mixed Danish Data Keeps Krone Submissive
GBP DKK saw a strong recovery over the past seven days after Theresa May delivered her key speech on Brexit. Many of the negatives were already known – such as that the UK would leave the single market – leaving investors to focus on the positives. One of these was that Parliament would get a vote on the final Brexit deal, while May also stated that she wanted to secure tariff-free trading with the EU under some form of customs union membership.
Additionally, the inauguration of President Donald Trump sent investors looking for safe currencies. Believing that the worst shocks for the Pound are behind it, investors bought Sterling due to the potential for safer currencies like the US Dollar and Euro to be rocked by Trump’s contentious policies; in particular those regarding trade.
The Krone, meanwhile, had to contend with some mixed data. Friday’s retail sales data showed a -1% drop on the month in December, while year-on-year sales stagnated. Forecasts had been for a return to marginal growth on the month and an acceleration from 2.6% to 2.9% on the year.
However, yesterday’s consumer confidence figures took the bite out of the poor sales data. December’s reading had clocked in at -0.3 and was predicted to edge higher to -0.1 for January. But the latest measure surprised to the upside, jumping to a five-month high of 4.5. This may improve the outlook for retail sales in the coming months; confident consumers are happy to spend money.
GBP DKK Exchange Rates Slump despite UK Supreme Court Ruling
As was largely expected, the UK Supreme Court upheld the November 2016 High Court ruling that the government must acquire Parliamentary approval before invoking Article 50. The government will now have to table a bill for MPs to vote on; this bill could be subject to amendment and therefore tie the government’s hands when negotiating on key issues like single market access.
This hasn’t improved sentiment towards the Pound, however. Market analysts have been surprised by the move, but have suggested that GBP DKK may be falling because investors are profit-taking on the recent strength of the Pound. In the past few days a combination of Theresa May’s free-trade goals for the Brexit negotiations, Donald Trump’s inauguration as US President and expectations of a government defeat in the Supreme Court have pushed GBP DKK up 3.1%.
UK government borrowing data was also released today, but as it showed that Chancellor Philip Hammond may be able to meet the revised targets for the 2016-17 fiscal year it should have boosted the Pound.
Will UK GDP Surprise to the Upside Following Strong Fourth Quarter Data?
A speech by Bank of England (BoE) Governor Mark Carney on Wednesday could give an indication of how the Monetary Policy Committee (MPC) is preparing for economic volatility as the Brexit negotiations begin. Comments on inflation in particular will be influential for GBP DKK exchange rates.
Thursday will see headline GDP figures for the final quarter of 2016 released. Forecasts are for a ten basis point slowdown to 2.1%. This likely won’t be enough to alarm investors and, with much of the UK data for the final three months of the year having outperformed, there is a possibility growth will surprise to the upside.
Danish data is typically sparse over the coming days. Next Monday will bring the business confidence index for January, currently forecast to weaken from -1 to -2. Tuesday 31st will see the release of the unemployment rate for December, which is expected to show joblessness remained steady at 4.2%. Also out will be foreign reserves figures – predicted to remain virtually unchanged at DKK 452 billion.