Danish Data Disappoints but Pound to Krone (GBP/DKK) Exchange Rate still Sinks on UK Growth Fears

Pound to Danish Krone (GBP/DKK) Exchange Rate Recovery Limited as UK GDP Growth Continues to Slow

Underwhelming UK data has limited the strength of the Pound to Danish Krone (GBP/DKK) exchange rate, as investors remain concerned that Britain’s economy will continue to slow down in Q2 2018.

Still, due to mixed demand for the Euro (EUR), GBP/DKK has only seen modest losses.

GBP/DKK opened this week at the interbank level of 8.46, and after climbing to a high of 8.50 on Tuesday morning the pair slipped back to trend nearer the interbank level of 8.47.

The Danish Krone (DKK) is pegged to the Euro, so its strength against a falling Pound has been limited by broad Euro weakness over the last week.

The main cause of Tuesday’s GBP/DKK fall was Britain’s April manufacturing PMI from Markit, which fell short of expectations and indicated that Britain’s economy continued to perform slower than expected.

Pound (GBP) Exchange Rates Falter as UK Manufacturing Falls Short of Forecasts

Following weaker-than-expected UK growth projections for Q1 2018, investors had hoped that Britain’s economy would show more signs of resilience in Q2.

However, markets became more concerned on Tuesday morning when Britain’s latest manufacturing PMI unexpectedly tumbled to 53.9 – its worst level in 17 months.

The figure was forecast to only slip from 55.1 to 54.8, but the previous figure was revised lower to 54.9.

According to Rob Dobson, director at IHS Markit, this makes it even less likely that the Bank of England (BoE) will tighten UK monetary policy any time soon:

‘The start of the second quarter saw the UK manufacturing sector lose further steam. The headline PMI dipped to a 17-month low as growth of production, new business and employment all slowed.

While adverse weather was partly to blame in February and March, there are no excuses for April’s disappointing performance, making the chances of a near term hike in interest rates by the Bank of England look increasingly remote.’

This caused investors to continue selling the Pound, but GBP/DKK remained above the week’s opening levels regardless.

Danish Krone (DKK) Exchange Rate Strength Limited as Eurozone Inflation Subdued

Underwhelming Eurozone and Danish data has weighed on Danish Krone (DKK) demand this week so far and is helping GBP/DKK to avoid major losses.

Monday saw the publication of Italian and German Consumer Price Index (CPI) projections for April. Italian inflation fell short of expectations, while German inflation was mixed.

German retail sales disappointed too, with the monthly figure unexpectedly contracting by -0.6% rather than rising at the forecast 0.8%.

While low-influence for the Euro-pegged Danish Krone, Denmark’s latest data has been underwhelming too.

Denmark’s March unemployment rate worsened from 4.0% to 4.1% and April’s manufacturing PMI slowed from 62.3 to just 53.3.

On top of this, the Euro (EUR) and by extension the Krone have been unappealing due to broad market appeal for the US Dollar (USD) – which is the Euro’s biggest currency rival.

Pound to Danish Krone (GBP/DKK) Forecast: Solid Eurozone Data Could Cause GBP/DKK Losses

Euro (EUR) weakness is keeping the Pound to Danish Krone (GBP/DKK) exchange rate from falling too far, despite Britain’s slower economic outlook and falling Bank of England (BoE) interest rate hike bets.

As a result, if much of the Eurozone’s upcoming influential data impresses investors it could push GBP/DKK lower towards the end of the week.

Wednesday will see the publication of the Eurozone’s March unemployment results and Q1 Gross Domestic Product (GDP) projections. Growth projections are likely to be particularly influential.

The Eurozone’s overall April inflation projections will follow on Thursday, with Eurozone PMI results for April and March retail sales figures due in on Friday.

If the Eurozone data impresses investors, the Danish Krone could see stronger support and sustain gains against the Pound.

On the other hand though, if Eurozone data disappoints or Thursday’s UK services PMI report impresses, the Pound to Danish Krone (GBP/DKK) exchange rate could continue to recover.

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