Pound Danish Krone (GBP/DKK) Exchange Rate Slips as BoE ‘More Likely’ to Cut Interest Rates
The Pound Sterling Danish Krone (GBP/DKK) exchange rate slipped over the morning, and the pairing is currently trading at an inter-bank rate of 8.6840Kr.
The Pound continued to slide following a speech from the Bank of England’s (BoE) rate-setter, Silvana Tenreyro.
Tenreyro said that the bank was more likely to cut interest rates than raise them in the case of a no-deal, disorderly Brexit.
The central bank policymaker said:
‘In my judgement, a situation where the negative demand effects outweigh those other effects is more likely, which would necessitate a loosening in policy. But it is easy to envisage other plausible scenarios requiring the opposite response.’
She also outlined the likely outcome of a smooth Brexit, saying:
‘Following a smooth Brexit, Sterling would be likely to appreciate. Potential supply will also be able to continue on its recent path, free of any immediate constraints. A stronger Pound and continued supply growth would both limit the extent that a recovery in demand feeds through into inflationary pressures.’
Danish Krone (DKK) Rises despite Industrial Production Contraction
This morning, Statistics Denmark released January’s industrial production figure, which showed production fell by 9.5%.
Despite this significant slide in Danish production, the Pound (GBP) continued to fall against the Danish Krone (DKK).
Data from the Eurozone also did little to dampen sentiment in the Krone, as the bloc’s GDP figure slipped to 1.1% annual growth during the final quarter of 2018.
Yesterday: Pound (GBP) Rises despite Downbeat BoE
Yesterday, sentiment for Sterling rose following a speech from the Bank of England’s (BoE) Michael Saunders.
In his speech, rate-setter Saunders said he saw no rush to raise interest rates amidst current Brexit uncertainties.
According to forecasts from the BoE, the UK economy is heading towards its weakest growth in a decade.
During the speech at Imperial College London, Saunders said:
‘The possibility that monetary tightening might be needed in the future does not necessarily mean we need to tighten now.
‘Given that at present economic growth is probably not strong enough to create excess demand and inflation is reasonably well behaved for now it makes sense to wait and to see how Brexit developments unfold.’
Pound Danish Krone Outlook: Will the GBP/DKK Exchange Rate Slip on Further Brexit Uncertainties?
As there is a lack of notable economic data releases for the rest of this week’s session, it seems likely that Brexit will continue to remain one of the main catalysts for movement in the GBP/DKK pairing.
It is thought that the UK will have to delay its departure from the EU, and speaking to BBC radio today, UK Chancellor Philip Hammond reaffirmed this when he said:
‘The government is very clear where the will of Parliament is on this. Parliament will vote not to leave the European Union without a deal. I have a high degree of confidence about that.’
Looking ahead to next week, Tuesday will see the UK parliamentary vote on Theresa May’s Brexit withdrawal act.
If MPs vote against this deal, it could see the Pound Danish Krone (GBP/DKK) exchange rate slip as uncertainty surrounding Brexit makes traders wary.