Brexit Uncertainty Means Pound Danish Krone (GBP/DKK) Exchange Rate Unable to Hold Highs

Pound to Danish Krone Exchange Rate Falls amid Strong Danish Retail Report

Concerns about the Brexit process and Britain’s economic outlook are keeping pressure on the Pound Danish Krone (GBP/DKK) exchange rate this week. Denmark’s latest data has been strong, but the Danish Krone (DKK) is pegged to the Euro (EUR).

Following last week’s fairly steady GBP/DKK gains from 8.30 to 8.34, the pair’s movement has been more mixed this week so far.

GBP/DKK briefly jumped to a fortnight high of 8.39 earlier in the week. However, GBP/DKK has since slipped back again. At the time of writing, the GBP/DKK interbank level is near the week’s opening levels.

The Pound (GBP) is unappealing amid the latest Brexit and UK economic uncertainties. The Euro-pegged Danish Krone is strengthening as the Euro strengthens.

Pound (GBP) Exchange Rates Slides on Concerns over Britain’s Economy

Earlier in the week, the Pound was supported by expectations that the UK and EU were getting ever closer to reaching a deal on Brexit. However, the Pound has been knocked today as concerns over Britain’s economic outlook dampen Brexit negotiation optimism.

Britain’s economy has been hit hard by the coronavirus pandemic. As Britain will likely be hit by the impact of leaving the EU in the coming months as well, economists are anxious about what is in store for Britain’s recovery chances.

According to Derek Halpenny, Head of Research at MUFG:

‘Given the severity of the GDP contraction for the UK this year is also likely to be worse than other advanced countries, the way back for the UK is likely to be more difficult and longer,’

Danish Krone (DKK) Exchange Rates Strengthen on Rival Losses amid Strong Retail Data

The Danish Krone is pegged to the Euro. This means that it follows the Euro’s market movements.

As a result, the Krone has been strengthening today thanks to Euro gains. Investors are buying the Euro amid weakness in the Euro’s rivals, the Pound and US Dollar (USD).

Optimism over how swiftly the Eurozone has tackled the coronavirus second wave have also boosted the Euro’s appeal.

Denmark’s latest data is unlikely to have influenced the Danish Krone’s movement, as the Krone’s movement is dominated by the Euro’s.

However, today’s Danish retail sales results from October were impressive overall. A huge 8.2% jump in retail sales was seen month-on-month, with yearly sales jumping 13.6%.

Pound Danish Krone (GBP/DKK) Exchange Rate Could Fall Further on Brexit Jitters

Investors could become more hesitant to buy the Pound in the coming sessions, if UK-EU negotiations show no notable developments.

Brexit remains the focus for the Pound outlook. If UK-EU relations worsen somehow, no-deal Brexit fears could return and the Pound could see continued losses.

On the other hand though, signs of optimism in talks could help the Pound to claw back some of its recent resilience and trend higher.

The Danish Krone, of course, will be influenced by factors that drive the Euro.

Euro investors will be looking at the strength of Euro rivals, as well as how the Eurozone economy is handling the coronavirus pandemic.

French inflation and growth, as well as Eurozone confidence data, could drive Euro movement on Friday.

Denmark’s November business confidence stats, also due on Friday, are unlikely to influence the Pound Danish Krone exchange rate much.

Josh Jeffery

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