Pound to Danish Krone Exchange Rate Forecast: GBP/DKK Could Continue to Climb on UK Growth Outlook

The latest European Central Bank (ECB) policy decision did little to stop the Pound to Danish Krone (GBP/DKK) exchange rate climb this week. Investors are now anticipating Friday’s UK growth projections.

Since opening this week at the interbank level of 8.48, GBP/DKK has seen some modest but firm gains. During Thursday’s ECB decision, GBP/DKK touched a weekly high of 8.55 and continues to trend above the level of 8.54 at the time of writing.

The Danish Krone (DKK) is pegged to the Euro (EUR), meaning it was directly influenced by Thursday’s European Central Bank policy decision in which the bank left monetary policy frozen as expected.

European Central Bank President Mario Draghi did a good job at balancing the line between hawkish and dovish talk during his press conference.

He maintained that the Eurozone economy still needed some stimulus in place for the time being. However, he also acknowledged that while Eurozone growth had moderated in recent months it was still generally solid and broad.

As a result, the Euro and by extension the Danish Krone outlook was largely unchanged.

Pound (GBP) Exchange Rates Firm Ahead of Friday’s UK Growth Report

Market anticipation for key UK data due for publication on Friday has helped the Pound (GBP) to sustain some modest gains this week, despite a lack of optimistic UK data published in recent sessions.

Investors are hoping that if UK growth projections are solid or even beat expectations, the Bank of England (BoE) will still hike UK interest rates in its May policy decision.

BoE interest rate hike bets plummeted last week in response to some underwhelming UK inflation data and cautious comments from BoE Governor Mark Carney.

However, analysts have asserted that while the BoE outlook may be more cautious now, a May interest rate hike is still possible and will depend on the strength of Friday’s UK growth projections.

This week’s UK data has been largely low-influence and anticipation for UK growth data has meant it has had no impact on Pound trade.

Thursday saw the publication of Britain’s April distributive trades results from the CBI. The figure only improved from -8 to -2 despite being predicted to rise to 5.

Danish Krone (DKK) Exchange Rates Slip despite Solid Denmark Data

As the Danish Krone is still pegged to the Euro (EUR) it has seen minimal influence from this week’s Danish ecostats.

Tuesday saw the publication of Denmark’s March retail sales results which saw solid improvements from February. Thursday’s April business confidence report was solid too, climbing from -2 to 1.

Ultimately though, this week’s Eurozone news has had a bigger impact on the Pound to Danish Krone (GBP/DKK) exchange rate.

Demand for the Euro and Krone have been weak, as underwhelming Eurozone business confidence results have given investors little reason to buy the currencies.

Businesses have been concerned about the possibility of US trade protectionism having a negative impact on the Eurozone economy.

These concerns were somewhat validated by European Central Bank (ECB) President Mario Draghi in his speech on Thursday. Draghi warned that protectionism remained a global risk.

Pound to Danish Krone (GBP/DKK) Forecast: UK Growth Projections in Focus

Investors may not have much time to digest the European Central Bank’s (ECB) April policy decision, as a slew of influential UK and Eurozone stats will be published on Friday.

Perhaps the biggest focus, at least for Pound (GBP) investors, will be Britain’s Q1 2018 Gross Domestic Product (GDP) projections.

UK growth is forecast to have slowed slightly from 0.4% to 0.3% quarter-on-quarter, and have remained at 1.4% year-on-year.

If the data is solid, Bank of England (BoE) interest rate hikes could improve and the Pound to Danish Krone (GBP/DKK) exchange rate could sustain most of its weekly gains.

On the other hand, poor UK growth or a dovish tone from BoE member speeches could knock GBP/DKK lower. GBP/DKK is especially likely to fall on Friday if the day’s key Eurozone data impresses investors.

French and Spanish growth and inflation projections, as well as German unemployment results and Eurozone confidence figures, could boost the Euro-pegged Danish Krone (DKK) if they impress.

Surprisingly strong Eurozone data could even offset some market bearishness from the ECB policy decision and this would leave the Pound to Danish Krone (GBP/DKK) exchange rate weaker.

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