Update 16:49 BST 31/07/2019:
The Pound to Danish Krone (GBP/DKK) exchange rate saw a solid rebound in demand later on in Wednesday’s European session, as investors bought the Pound (GBP) back up from its worst levels.
After Monday’s Pound plummet, the British currency hit its cheapest levels all year against many major rivals, including the Danish Krone (DKK). It rebounded thanks to this, as well as month-end fixings.
However, analysts believe the currency’s potential for gains is limited as no-deal Brexit fears continue to dominate the outlook.
GBP/DKK was able to rebound a little higher thanks to today’s weakness in the Euro (EUR) and Euro-pegged Krone. Mixed Eurozone data has kept investors speculating about when the European Central Bank (ECB) will introduce more dovish monetary policy.
Pound to Danish Krone Exchange Rate Near Worst Levels despite Mixed Eurozone and Denmark Data
Despite rising speculation that the European Central Bank (ECB) could take a more dovish tone on Eurozone monetary policy, the Pound Sterling to Danish Krone (GBP/DKK) exchange rate has been unable to recover much from its worst levels since 2017.
Since opening this week at the interbank level of 8.30, GBP/DKK has tumbled on a surge in no-deal Brexit fears.
Yesterday, GBP/DKK hit a low of 8.12, which was the worst interbank level since September 2017. At the time of writing today, GBP/DKK trended close to those lows near the level of 8.15.
The Danish Krone (DKK) is pegged to the Euro (EUR), and so is regularly influenced by Eurozone data including this morning’s mixed stats.
Denmark’s latest unemployment data was also disappointing, but GBP/DKK remained near its worst levels amid persisting Pound (GBP) weakness.
Pound (GBP) Exchange Rates Reeling after Two Days of Notable Losses
At the beginning of the week, markets digested recent comments from the new UK Boris Johnson government over Brexit, and they dampened remaining market hopes of the government taking a soft stance.
Prime Minister Boris Johnson has indicated that he will not accept a UK-EU withdrawal deal unless the EU is willing to change its stance on the controversial Irish backstop.
On top of this, his government has indicated that they are working under the assumption of a no-deal outcome. These factors led to a sharp Pound (GBP) fall on Monday and continued losses yesterday.
Sterling has been kept under pressure today, too. Investors are hesitant to buy the British currency on Brexit fears, and Bank of England (BoE) uncertainties are coming back into focus ahead of tomorrow’s BoE decision as well.
According to Osamu Takashima from Citigroup Global Markets Japan:
‘In addition to Brexit, markets are starting to price in the Bank of England moving to dovish from hawkish at its next meeting, so this drives Sterling depreciation’
Danish Krone (DKK) Exchange Rates Lack Drive amid Mixed Eurozone Data
Despite a lack of strong Eurozone or Denmark data or news in recent sessions, the Euro-pegged Danish Krone continues to trend near its best levels since 2017 against the Brexit-battered Pound.
The Danish Krone’s potential for gains against a weak Pound has been limited, as this week’s Eurozone and Denmark data has done little to douse European Central Bank (ECB) easing speculation.
This morning’s data has only kept investors speculating how dovish the ECB will be in its next policy decision.
Germany’s June retail sales were highly mixed, as were France’s July inflation projections.
The Eurozone’s growth projections came in slightly above forecasts year-on-year, but the bloc’s core inflation rate came in lower than expected.
On top of the mixed Eurozone data, Denmark’s June unemployment rate worsened from 3.7% to 3.8%. These stats ultimately had little impact on the Danish Krone however, as the currency is moved more by news that impacts the Euro.
Pound to Danish Krone (GBP/DKK) Exchange Rate Could Recover Further on Manufacturing Data
As no-deal Brexit fears are likely to keep a lid on the Pound’s (GBP) potential for gains, the Pound to Danish Krone (GBP/DKK) exchange rate is more likely to recover if the Euro-pegged Danish Krone (DKK) weakens.
As a result, Euro (EUR) and Danish Krone investors are anticipating further influential news and data due through the end of the week.
The Federal Reserve will hold its July policy decision this evening. If the Fed is less dovish than expected, the Euro would weaken due to negative correlation with a strengthening US Dollar (USD), which would also weaken the Danish Krone.
In terms of relevant data, manufacturing PMI data from July will be published tomorrow. Concerns about German manufacturing especially have been influencing European Central Bank (ECB) interest rate cut speculation recently and could influence Krone movement.
Thursday will also see the Bank of England (BoE) hold its August policy decision, which could lead to even further Pound to Danish Krone (GBP/DKK) exchange rate weakness if the bank is more dovish than expected.