Pound Sterling Danish Krone (GBP/DKK) Exchange Rate Benefits as Brexit Hopes Outweigh Business Sentiment Slump

Deteriorating UK Business Sentiment Fails to Drag Down Pound Sterling Danish Krone (GBP/DKK) Exchange Rate

A fresh deterioration of the CBI business optimism index was not enough to prevent the Pound Sterling to Danish Krone (GBP/DKK) exchange rate extending its gains today.

Although the index dipped from -16 to -23, highlighting the continued negative impact of Brexit-based uncertainty, the mood towards Pound Sterling (GBP) picked up sharply over the course of the day.

This positive move was driven by reports that the Labour Party is prepared to back an attempt to prevent a no-deal Brexit by increasing parliamentary control over the process.

Even as the March deadline continues to draw closer investors were encouraged to lower the odds of the UK crashing out of the EU without a deal, bolstering the Pound against its rivals.

Rising Consumer Confidence Fails to Boost Danish Krone (DKK)

The mood towards the Danish Krone (DKK), meanwhile, proved less positive, in spite of an improved consumer confidence index reading.

While confidence showed a solid improvement on the month at the start of 2019 this failed to offer any significant support to DKK exchange rates.

Instead, the Krone followed the Euro (EUR) lower this morning, owing to its currency peg with the single currency.

With markets taking a bearish view of the Euro ahead of tomorrow’s European Central Bank (ECB) policy announcement the Danish Krone was forced to trend lower across the board.

Danish Krone (DKK) Exchange Rate Vulnerable Ahead of ECB Announcement

If the ECB takes a less optimistic outlook on the Eurozone economy in the commentary that follows its January meeting DKK exchange rates could lose further ground.

Signs that the ECB is likely to leave interest rates on hold for longer would encourage the Danmarks Nationalbank to maintain its own loose monetary policy.

On the other hand, a more hawkish message from the ECB may give the Danish Krone a boost against the Pound.

While recent Eurozone inflation data has proved disappointing any signs of policymakers optimism are likely to shore up the Euro, and the Krone by extension, even though the prospect of tighter ECB policy remains distant.

Solid UK Reported Retail Sales Index to Support GBP/DKK Exchange Rate

As long as markets see less chance of a no-deal Brexit, in spite of the parliamentary deadlock, the GBP/DKK exchange rate is likely to remain on a stronger footing.

However, fresh volatility could be in store for the Pound on the back of January’s CBI reported retail sales index.

Forecasts point towards a solid rebound in sales at the start of 2019, suggesting that consumers are taking a more optimistic view than businesses.

Resilient consumer spending could help to shore up the UK economy in the short term, helping to mitigate the negative impact of Brexit-based uncertainty.

Hopes of a possible extension to the Brexit deadline may also give the GBP/DKK exchange rate an additional boost ahead of the weekend.

Hannah Wilson

Contact Hannah Wilson


Related