Pound Trends Lower against Danish Krone, Will Rising Inflation Place Pressure on UK Consumers?

The Pound Danish Krone (GBP DKK) exchange rate tumbled today as the UK’s latest Consumer Price Index suggested that consumers are likely to come under increasing pressure over the coming year.

Pound Retreats as Inflation Skyrockets

The Pound continued sliding today following the release of the UK’s latest CPI figures. They showed that inflation surged from 2.3% to 2.7% in April, reaching its highest levels since 2013 and beating expectations that it would rise to 2.6%

Analysts warned that the accelerating pace of inflation is likely to begin dragging on the UK economy, with its all-important services sector (the source of much of Britain’s recent economic resilience) likely to come under pressure as consumer spending plummets.

Meanwhile, the Bank of England (BoE) has previously signalled that a further rise in inflation is unlikely to prompt its members to tighten monetary policy as Governor Mark Carney attributes the jump to the sharp devaluation in the Pound since Brexit, suggesting that interest rates are likely to remain on hold for the foreseeable future.

Michael Baxter, economics commentator for the Share Centre said;

‘There is nothing in today’s data to suggest that the MPC will deviate from its current course. The odds of an increase in UK interest rates later this year are diminishing.’

Danish Krone Strengthened by Macron’s Early Performance

The Danish Krone’s position pegged to the Euro (EUR) has led it to strengthen over the last 24 hours as investors reacted positively to Emmanuel Macron’s first day in office.

Macron’s first move as President was to appoint Republican mayor Édouard Philippe as his new Prime Minister, a strategic decision that analysts believe will help to bolster Macron’s position in parliament by destabilising the right and hopefully gaining some bi-partisan support for his upcoming economic reforms.

Markets were also upbeat following the President’s first official meeting with German Chancellor Angela Merkel as the two spoke in a joint press conference about striving to ‘deepen the European Union’.

Merkel also appeared receptive to Macron’s desire to seek reforms to the European Union, although some analysts are doubtful that many of his economic reforms are likely to find much support ahead of German elections later this year.

GBP DKK Forecast: UK Employment Data Ahead

The UK will release its latest employment data tomorrow, with unemployment expected to hold at 4.7% in March, however investors are more likely to focus on the latest wage growth figures as any further widening of the gap between inflation and real pay is likely to prompt the GBP DKK exchange rate to slide once again.

Meanwhile the Danish Krone may be strengthened tomorrow by the final Eurozone inflation reading for April as it is expected to show that inflation jumped from 1.5% to 1.9% last month, leaving it just short of the European Central Bank’s target rate of 2.0%.

Matthew Andrews

Contact Matthew Andrews