Brexit Woes Weigh on GBP/DKK Exchange Rate as Cabinet Meets to Discuss Negotiation Strategy

Resurgent Concerns over Lack of Government Clarity Weighs on GBP/DKK Exchange Rates as Cabinet Gathers to Sketch out Negotiation Aims

Brexit is firmly in focus again today, with the GBP/DKK exchange rate weakening as markets await news from the first of two key Cabinet meetings to discuss the government’s negotiating strategy.

The Pound Sterling to Danish Krone exchange rate has weakened -0.2% today as the Cabinet meets against a backdrop of business dissatisfaction with the lack of clarity provided by the UK government.

The British Chambers of Commerce (BCC) today published an open letter to the Prime Minister, warning her that the business community is growing impatient and that the government must clarify its Brexit objectives as soon as possible.

The letter, written by BCC Director General Adam Marshall and President Francis Martin states:

‘The perception amongst businesses on the ground, large and small alike, is one of continued division. Even amongst the many optimistic, future-oriented firms — those who see opportunity in change — patience is wearing thin. Directly-affected companies are poised to activate contingency plans. Many others, worryingly, have simply disengaged.’

GBP/DKK Exchange Rate Losses Continue despite Mixed Danish Industrial Production Data

The latest Danish industrial production data paints a mixed picture of sector output during December 2017, but this has failed to slow the pace of the GBP/DKK exchange rate losses so far today.

Month-on-month industrial production bettered forecasts, slowing from 2.3% to 1.2% against forecasts from Trading Economics for a contraction of -0.6%.

The previous month’s growth was also revised higher to 2.3% after initially printing at 2.1%.

However, year-on-year production posted a significant -3.1% decline; outpacing forecasts by a whole 2 percentage points.

Economists at Trading Economics had predicted annualised growth would have recovered to 0.2% in the final weeks of last year.

Markets were given further reason to feel gloomy regarding the Danish Krone after a ten-year review of cohesion in the European Union found that Denmark has seen its alignment with the EU slowly weakening over the past decade.

The EU Cohesion Monitor found weakening economic ties between Denmark and the rest of the bloc, as well as reporting; ‘The rise in the country’s individual cohesion primarily came from the Experience and Attitudes indicators, while the Engagement indicator (which measures voter behaviour) reflected rising scepticism about the European Union.’

Bank of England (BoE) Monetary Policy Decisions and Inflation Forecasts could Weaken GBP/DKK Exchange Rate Tomorrow

There is no UK data left for release today, but tomorrow sees the latest Bank of England (BoE) ‘Super Thursday’, in which the central bank announces its latest monetary policy decisions and publishes the quarterly Inflation Report.

With inflation having recently slowed from the peak levels reached last year and other economic data offering a mixed picture of UK economic resilience, it is likely that the Monetary Policy Committee (MPC) will remain cautious on the interest rate outlook.

This would weaken the Pound Sterling to Danish Krone exchange rate tomorrow, with further losses likely if the Inflation Report predicts that consumer price growth will continue to fall back towards target levels and therefore further reduce the need for interest rate hikes.

Danish current account and trade balance figures for December are set for release tomorrow.

While the current account balance is forecast to remain virtually unchanged with a surplus of DKK15.5 billion, the trade surplus is expected to swell from DKK3.7 billion to DKK5.1 billion in the final month of 2017.

This would mark the second-largest trade surplus recorded since the first half of 2017, although it will be still be significantly below the DKK8.66 billion recorded in September 2017.

The latest data from Denmark is unlikely to have a notable impact upon the GBP/DKK exchange rate, given the influential nature of what is on offer from the UK calendar, but it could enhance gains or slow losses if it prints positively.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard