While Pound Sterling (GBP) is generally weaker as a result of concerns about the UK economic outlook, GBP/DKK exchange rate losses were limited thanks to a decline in Danish retail sales.
OBR Paints Gloomy Picture of UK Economic Outlook, GBP Exchange Rates Struggle
The Office for Budget Responsibility (OBR) weakened Pound Sterling (GBP) exchange rates earlier this week by slashing UK growth forecasts.
Supporting the OBR, Financial Times Economics Editor Chris Giles said;
‘The question is whether the OBR has spilled too much red ink over the longer-term economic forecasts – sadly, it is on pretty firm territory.
[One] building block of sustainable growth rates is Britain’s productivity — the amount of output produced for every hour worked.
It has not increased in the past decade, so an OBR forecast that it will…grow at half its historic rate is far from unduly pessimistic’.
Pound Sterling Today: BoE Policymaker Discusses ‘Other Challenges’ Presented by Brexit
Other UK news has also concerned Pound traders, as it concerns future Bank of England (BoE) interest rate decisions.
Silvana Tenreyro, a relatively new addition to the Bank of England (BoE) Monetary Policy Committee (MPC), has been speaking to Bloomberg.
She has warned that the Brexit process will have a direct impact on future BoE interest rate decisions. Clarifying the situation, Tenreyro stated;
‘People up until recently thought that Brexit meant monetary policy would remain highly accommodative and interest rates would stay low forever.
But Brexit might present other challenges that require the opposite. It might require an adjustment either way, and it’s not obvious. That’s something to be prepared for’.
The fact that Brexit uncertainties are permeating the MPC has done little to reassure traders, as they speculate about just when the BoE could next consider an interest rate hike.
Disappointing Danish Sales Stats keep DKK/GBP Exchange Rate in Check
While a struggling Pound would normally mean GBP/DKK losses, the Danish Krone has been coming under pressure of its own.
Danish retail sales unexpectedly declined in October, weighing on DKK exchange rates.
Both monthly and annual sales have tumbled, by -1.1% and -1.8% respectively.
The fact that the Krone is pegged to the Euro has lent the currency some support however, with the Euro broadly strengthening in response to positive German data.
UK Confidence could Trigger Pound to Danish Krone (GBP/DKK) Losses
Apart from Brexit news, the Pound to Krone exchange rate could be further influenced by next week’s GfK consumer confidence measure.
Out on November 30th, this is considered a high-impact piece of data as it looks at how optimistic consumers are about the future UK economy.
In October, the reading slipped from -9 points to -10 and there are concerns that the November reading will hit -11.
Given the negative implications for Christmas spending, a decline in the confidence score could see traders back the Krone instead of a riskier Pound.
Next week’s main Danish news will be initial Q3 GDP estimates, out on November 30th.
Economists have offered mixed forecasts, as quarter-on-quarter growth is tipped to slow but the year-on-year reading is expected to rise from 2.7% to 2.9%.