GBP/DKK Exchange Rate Edges Higher as Danish Economy to ‘Suffer’
The Pound Danish Krone (GBP/DKK) exchange rate rose by 0.5% as Denmark’s recent economic boom is predicted to be replaced by a 10% contraction, according to Denmark’s national bank. The pairing is currently trading around 8.442kr.
The Danish Krone (DKK) has suffered from the Danish central bank’s slashing of its growth forecast. Denmark’s economy – which is principally export-driven – is expected to suffer from weak demand due to the coronavirus pandemic wracking the world’s economy.
Lars Rohde, the Governor at Denmark’s central bank, said in a statement:
‘In Denmark, our starting point for getting the economy back on track when the outbreak subsides and the measures are rolled back is strong. But it is going to hurt, before we get there.’
Today also saw the publication of Denmark’s Manufacturing PMI for March, which fell deeper into contraction territory from 48.4 to 46.8.
Consequently, this limited the appeal of the Danish Krone as its economic outlook continues to darken.
However, the DKK/GBP exchange rate failed to benefit the rating agency Fitch’s forecast of a stable outlook for the Danish economy.
The ratings agency deemed Denmark’s an ‘AAA’, which reflects ‘a wealthy, high-value-added economy, supported by strong institutions and a track record of sound macroeconomic and fiscal policy’.
Pound (GBP) Rises Despite UK Manufacturing Being ‘Knocked Sideways’
The Pound (GBP) rose against the Danish Krone (DKK) despite this morning’s release of the finale UK Markit Manufacturing PMI for March.
The gauge showed a better-than-expected result, but the reading showed that Britain’s manufacturing sector had remained mired in contraction territory at 47.8.
Duncan Brock, the Group Director at the Chartered Institute of Procurement and Supply, commented:
‘The manufacturing sector was knocked sideways by the impact of COVID-19 and into contraction territory, experiencing some of the most challenging trading conditions since PMI records began.’
‘Closed borders, significant shipping delays and a reluctance from clients to authorise new instructions resulted in the sharpest contraction in orders from domestic and overseas markets since 2012.’
Sterling has begun to recover as the first quarter closes and hopes rise over Prime Minister Boris Johnson requesting for an extension to UK-EU trade talks. If this is forthcoming, we could see the GBP/DKK edge higher on increased certainty for British firms.
GBP/DKK Forecast: Could GBP Rise Higher as the Danish Economy Suffers from Trade Woes?
The Pound (GBP) could hold onto its gains if UK-EU Brexit negotiations are extended. However, with the UK’s economy being compromised by potentially weeks – even months – of a lockdown, we could see Sterling lose some of its appeal.
Danish Krone (DKK) investors will be paying close attention to global economic developments around the coronavirus pandemic. Any signs that this could further compromise world trade would weaken the Danish economy and send the GBP/DKK soaring.