Pound to Danish Krone Exchange Rate Resilient after Last Week’s Advances
Last week saw a jump in the Pound to Danish Krone (GBP/DKK) exchange rate, and this week so far the pair has been able to hold its ground. The Danish Krone (DKK) is pegged to the Euro (EUR), which has been unable to recover despite strong Eurozone data.
After opening last week at the interbank level of 8.16, GBP/DKK saw briefly volatile movement before jumping higher in the second half of the week. Ultimately, GBP/DKK closed the week at the interbank level of 8.27.
GBP/DKK briefly jumped even higher when markets opened this morning. The pair touched on its best levels in over half a month, since the first half of July.
While unable to hold its best levels, GBP/DKK continues to trend above the week’s opening levels at the time of writing. Sterling (GBP) has been able to hold last week’s gains thanks to hopes for Britain’s handling of the coronavirus pandemic.
Pound (GBP) Exchange Rates Resilient on Coronavirus Hopes despite Mixed UK Data
This morning saw the publication of Britain’s final July manufacturing PMI data.
While the data did show an improvement from June, it wasn’t quite as much of a recovery as the preliminary figure projected. Manufacturing rose to 53.3 rather than the expected 53.6.
However, despite this the Pound (GBP) has seen fairly strong movement since markets opened this week. The British currency has been able to hold its ground and sustain most of the impressive gains seen last week.
Sterling was able to capitalise on a plummeting US Dollar (USD) last week. As the US coronavirus outlook concerned investors, the UK coronavirus outlook is being seen as more optimistic in comparison.
According to Thu Lan Nguyen, Analyst at Commerzbank:
‘In contrast to the beginning of the pandemic, the British government is now taking far tougher action to prevent the virus from spreading again at a rapid rate,
… the fact that the British government appears to be capable of learning is now being rewarded with a strong Pound,’
Danish Krone (DKK) Exchange Rates Pressured by Euro (EUR) Pullback
The Danish Krone (DKK) is a currency pegged to the Euro (EUR). This means it moves in parallel to the Euro’s movements.
As a result, GBP/DKK’s resilient movement today is largely due to the Euro being unable to recover against the Pound following last week’s movements.
Investors sold the Euro last week due to some gloomy German and Eurozone growth rate results. On top of this, investors also sold the currency from its best levels after weeks of strong performance.
While today’s Eurozone manufacturing PMIs all beat expectations as well, it was unable to help the Euro to mount a rebound. As a result, the Krone was unable to rebound either.
Speaking on the Euro rally, Analysts at Credit Suisse said:
‘This suggests the rally has become exhausted near-term and although our core outlook stays bullish, we now look for a consolidation/correction to emerge.’
Today’s Denmark manufacturing PMI data was also much stronger than expected. However, it ultimately had no notable impact on the Danish Krone’s movement.
Pound to Danish Krone (GBP/DKK) Exchange Rate Awaits Bank of England (BoE) Decision
The Pound to Danish Krone (GBP/DKK) exchange rate is holding its ground today, but the pair’s potential to gain or hold may be limited.
Sterling’s (GBP) outlook remains filled with economic and Brexit uncertainties. What’s more, analysts are anxious that the Bank of England (BoE) could take a more dovish stance on the UK economy or coronavirus outlooks as well.
The Bank of England will hold its August policy decision this Thursday. It is likely to be the week’s biggest news for GBP/DKK investors.
If the bank shows any signs that it could move towards negative interest rates at some point in the future, the Pound could slump and lose much of its recent gains.
On the other hand though, if the bank is more optimistic than expected on the UK outlook the Pound is more likely to hold its ground.
As for the Danish Krone (DKK), the Euro-pegged currency will continue to be driven by Eurozone news.
Wednesday’s Eurozone and UK services and composite PMI, for example, could also influence the Pound to Danish Krone (GBP/DKK) exchange rate.