UK Lockdown Fears Send Pound Danish Krone (GBP/DKK) Exchange Rate Tumbling

GBP/DKK Exchange Rate Sinks on Growing UK Recession Fears

The Pound Danish Krone (GBP/DKK) fell by -1% today with the pairing currently trading around 8.10kr. Sterling has suffered from growing UK recession fears today after Prime Minister Boris Johnson warned that the nation could face an Italy-style lockdown.

Downing Street is being criticised for sending out mixed-signals after members of the public appeared to ignore social-distancing measures over the weekend. Consequently, this has sparked demand for more draconian measures from the British Government.

Pound (GBP) investors are growing increasingly concerned that this could further negatively impact the British economy. The ruling would put more jobs and businesses at risk.

Yael Selfin, KPMG UK’s chief economist, was downbeat in her analysis, commenting:

‘[T]here will also be a very substantial negative impact on the global economy and the UK’s economic performance this year and potentially next. Until we know how and when the Covid-19 outbreak will end, the scale of the negative economic impact will be difficult to quantify.’

‘However, it is now almost certain that the UK is slipping into its first significant downturn in over a decade.’

Sterling traders will be awaiting today’s statement from the British Government. If Chancellor Rishi Sunak capitulates to pressures to increase wages for the self-employed – or offers any further stimulus measures – we could see the GBP/DKK exchange rate edge higher.

Danish Krone (DKK) Edges Higher After Huge Danish Government Stimulus

The Danish Krone (DKK) rose against Sterling despite today’s release of Denmark’s consumer confidence report for March, which fell from 3.3 to 0.4.

However, the DKK/GBP exchange rate has remained on firm ground after the Danish Government told private companies that were hit by the coronavirus epidemic that they would receive 75% percent of their employee’s salaries.

The Danish Government’s plan could cost as much as 13% of the nation’s GDP, adding up to the equivalent of $2.5 trillion in the US staggered over 13 weeks.

DKK has also benefited from news that Germany’s Covid-19 infection curb could be flattening. As Eurozone’s largest economy, Germany’s recovery offers a glimmer of hope for the trade-reliant Danish economy.

Lothar Wieler, the head of the Robert Koch Institute, commented:

‘We are seeing signs that the exponential growth curve is flattening off slightly. But I will only be able to confirm this trend definitively on Wednesday.’

GBP/DKK Outlook: Could the Danish Krone Rise on Easing European Covid-19 Cases?

Sterling investors will be looking ahead to tomorrow’s publication of the flash UK Services and Manufacturing PMIs. However, with both of these set to contract at 45 we will likely see the GBP/DKK exchange rate suffer.

Danish Krone (DKK) traders will be paying close attention to global economic developments. Any signs of improvement in Europe’s coronavirus situation would provide a boost for the trade-reliant Danish economy and uplift the value of DKK.