GBP/DKK Exchange Rate Falls, BoE Rate Cut Odds on a Razor’s Edge
The Pound to Danish Krone (GBP/DKK) exchange rate dipped by -0.2% today, with the pairing currently trading around 8.819Kr as market appetite for Sterling slips on an approximate 52% chance that the Bank of England (BoE) will cut its interest rates this afternoon.
James Smith, an economist at ING, commented:
‘It’s not clear that the remaining five ‘internal’ members of the committee will back calls for easing right now. Admittedly, we don’t have that much to go on in terms of communication, but as we noted at the time, our sense from Governor Mark Carney’s recent speech was that he hadn’t been fully convinced of the merits of cutting interest rates this month.’
As the bank’s decision is on a razor’s edge, UK markets have remained jittery on rising fears over Britain’s economic outlook post-Brexit, as the nation prepares to officially leave the European Union tomorrow evening.
Neil Wilson, an analyst at Market.com, was more measured in his response, however, commenting:
‘Recent comments from several policy makers at the Bank, some softer inflation data and GDP numbers, and persistent risks to the global outlook suggest the MPC may choose to act now to cut.’
If the Bank of England (BoE) does go ahead and slash its interest rates today, we would likely see the GBP/DKK exchange rate plummet on heightened uncertainty for the British economy going forward.
DKK/GBP Exchange Rate Rises, Danish Unemployment Holds Steady in December
The Danish Krone (DKK) edged higher after this morning’s release of December’s Danish unemployment rate remained at 3.1%.
However, some of the DKK’s gains were held back by a disappointing January Danish industrial outlook report, which fell from -7 to -9, and dimmed Denmark’s economic outlook for 2020 with industrial manufacturing being one of the nation’s major sources of income.
The DKK/GBP exchange rate edged higher, however, with European currencies benefiting from their relative safe-haven status as China’s coronavirus outbreak threatens to unsettle the world’s second-largest economy.
However, if the outbreak continues, we could see this begin to have a negative impact on the Danish economy, which relies heavily on healthy global trade relations. If China’s economy sinks, this would have a knock-on effect on much of Europe’s powerhouse economies, like Germany, France, and by extension, Denmark.
GBP/DKK Outlook: Could Brexit Day Weaken Sterling?
Pound (GBP) investors will likely remain jittery ahead of tomorrow’s Brexit deadline when the UK is due to officially leave the European Union. Any signs that the UK’s economy could face further uncertainty in the months ahead – with the UK-EU trade deal still remaining unresolved – would prove GBP-negative.
The Danish Krone (DKK), meanwhile, will likely remain sensitive to global developments, with any further signs of a negative impact on the global economy weighing on Denmark’s manufacturing sector weakening market appetite for DKK.