Pound Danish Krone Exchange Rate Steady, Danish Consumer Confidence Sinks in November

GBP/DKK Exchange Rate Rangebound, ECB Takes ‘Wait and See’ Approach to Monetary Policy

The Pound Danish Krone (GBP/DKK) exchange rate held steady today, with the pairing currently trading around 8.726Kr after November saw Danish consumer confidence sink to its weakest reading since December 2016.

The Euro-pegged Danish Krone (DKK) also struggled to gain after the European Central Bank’s (ECB) monetary policy meeting minutes from last month showed the bank taking a ‘wait and see’ approach to monetary policy.

The bank said that its stimulus measures required more time to take effect. The ECB also added that it was concerned about fiscal efforts to reduce public debt levels in Italy, France, Spain and Belgium.

The ECB said in its statement:

‘While clarification on their 2020 budget plans were asked from these countries, we don’t think the [European Commission] will start an arm wrestle for more austerity as there are increasing calls for a more active fiscal policy across the bloc. Indeed, the Commission called once again member states with fiscal space – notably Germany and the Netherlands – to engage in a more supportive fiscal policy.’

After the German economy narrowly avoided a technical recession this month, concerns are rising over Germany potential to refrain from spending and stimulating the economy in the near-term.

GBP/DKK Exchange Rate Steady, UK Public Spending Hits Five-Year High Deficit

The GBP/DKK exchange rate failed to improve following this morning’s release of October’s UK public sector net borrowing figure, which reached its largest budget deficit in five years at £10,509 billion.

Andrew Wishart, UK Economist at Capital Economics, commented that the government’s spending reflects October’s preparations for a no-deal Brexit

Mr Wishart commented:

‘The worst October for the public finances for five years won’t prevent whoever wins the election embarking on a fiscal splurge. Borrowing appears to have been higher than expected due to Brexit preparations, and leaves the budget deficit on track to rise for the first time in a decade this year.’

In UK political news, today saw the Labour Party unveil its election manifesto which Labour leader Jeremy Corbyn described as the party’s ‘most radical and ambitious plan to transform our country in decades’.

We could see the GBP/DKK exchange rate ease if Labour’s new manifest boosts their favourability in the polls, as this would dent market confidence in Sterling as Labour are known to have less business-friendly policies than the Tories.

GBP/DKK Outlook: Could DKK Ease on Deteriorating Eurozone Data?

Pound (GBP) investors will be looking ahead to tomorrow’s release of the flash UK Markit Services PMI for November, with any signs of the UK’s largest sector emerging from contraction territory boosting the GBP/DKK exchange rate.

Tomorrow will also see the publication of November’s flash UK Markit Manufacturing PMI, which is expected to remain mired in contraction territory at 49.

With no Danish economic data due until next week, Danish Krone (DKK) investors will be paying close attention to Germany’s economic health, with tomorrow seeing the release of Germany’s Markit Manufacturing PMI.

Any signs of deterioration in Germany’s largest sector would strengthen the GBP/DKK, with a weakening Euro dragging down the single currency-pegged Danish Krone.