BoE Official Backs Rate Hike, GBP/DKK Rises 0.5%

The Pound climbed by 0.5% against the Danish Krone on Thursday, hitting an exchange rate of kr8.4370 and taking the pairing away from its recent lows.

Pound Rallies after BoE’s McCafferty Remains Hawkish

On a busy Thursday for the UK, the Pound has advanced against the Danish Krone thanks to a strong statement from the Bank of England’s (BoE) Ian McCafferty.

Commenting on the likelihood of his voting for a future interest rate hike, as he had previously, McCafferty simply stated that;

‘As of today, I would not be changing my position’.

Sterling was also boosted by McCafferty’s thoughts on unwinding quantitative easing. Comparing the BoE to the US Federal Reserve, McCafferty said;

‘Given that other central banks are thinking about [unwinding], I think it would be remiss of us not to at least think about it’.

Other UK news has not been so positive; the Office of Budgetary Responsibility (OBR) has warned that there could be future shocks for the UK economy along with the ongoing problems posed by slow economic growth.

Elsewhere, the BoE’s credit report showed that the number of defaults was rising.

Danish Krone Drops as Euro Softens

The Danish Krone’s slip against the Pound was partly due to Sterling’s strength but also due to the Euro falling.

In the latter case, the Euro has tumbled due to excessive profit-taking by traders. Because the Krone is pegged to the Euro, this has lowered the value of DKK by extension.

This week has been devoid of Danish news for the most part; the main data came on Monday and covered the trade balance and inflation numbers for May and June. Respectively, inflation slowed and the trade surplus rose significantly.

GBP/DKK Exchange Rate Forecast

Future Pound/Danish Krone exchange rate movement may occur as a result of UK inflation rate figures on 18th July , along with later retail sales and government borrowing stats on the 20th and 21st respectively.

Inflation is forecast to fall from 2.9% to 2.7%; this could lessen the current UK wage squeeze but would still leave inflation far above the pace of wage growth.

Sales are more optimistically forecast to rise significantly, which could provide the Pound with a late-week advantage. Finally, a deficit reduction is forecast for government borrowing for the public sector, which may also give some last-minute support to the Pound.

Next week will be similarly sparse when it comes to Danish data; consumer confidence stats are due on Thursday, while retail sales figures are out on Friday.

Confidence is forecast to fall slightly, while retail sales are similarly predicted to fall annually.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

Contact John Cameron