Rising Danish Industrial Production Weighs Down Pound Danish Krone Exchange Rate
The Pound to Danish Krone (GBP/DKK) exchange rate weakened at the start of the week as December’s Danish industrial production data bettered forecast.
While investors had expected to see production contract -3.5% on the month the data instead showed a 2.3% increase, suggesting greater resilience within the manufacturing sector.
This helped to bolster confidence in the outlook of the Danish economy, even though December’s trade data failed to improve as anticipated.
Although the headline trade surplus unexpectedly narrowed this was not enough to drag the Danish Krone (DKK) down against its rivals at the start of the week.
With market risk appetite generally limited as worries over the global economic outlook linger the Krone was able to push higher against its more sensitive rivals.
Danish Inflation Data Forecast to Trigger DKK Exchange Rate Volatility
DKK exchange rates could find further traction on Wednesday with the release of January’s inflation data.
Markets anticipate a modest uptick in the year-on-year inflation rate, pushing the headline rate up from 0.5% to 0.7%.
While this would still fall some way short of the levels of inflation that Danish policymakers might wish to see any improvement here could give the Krone a leg up against its rivals.
On the other hand, if inflationary pressure fails to pick up as forecast the Danish Krone could experience some renewed selling pressure.
Any weakness in the Euro could equally put a dampener on DKK exchange rates, given the Krone’s peg to the single currency.
If doubts over the health of the Eurozone economy continue to mount this may leave the Danish Krone on a generally weaker footing, offering the GBP/DKK exchange rate a potential rallying point.
Pound Set to Soften in Anticipation of UK Gross Domestic Product Report
Support for Pound Sterling (GBP) could prove limited over the course of the week, however, thanks to a relative absence of fresh UK data releases.
With the impact of last week’s Bank of England (BoE) policy meeting fading the Pound could struggle to hold onto a positive footing against its rivals.
Increasing anticipation ahead of the release of the fourth quarter UK gross domestic product report on Friday may also weigh heavily on the GBP/DKK exchange rate.
Even though forecasts point towards the quarterly growth rate remaining positive in the final three months of 2020 the potential for a weaker showing remains.
If the growth rate fails to hold up in the face of ongoing Covid-19 pressures the appeal of the Pound is likely to diminish, leaving the GBP/DKK exchange rate on the back foot.
On the other hand, signs that growth was more resilient than expected in the fourth quarter may help to shore up demand for the Pound once again.