Danish Krone to Pound (DKK/GBP) & Euro (DKK/EUR) Forecast – Softening on Struggling Germany
The Danish Krone to British Pound (DKK/GBP) exchange rate declined on Thursday despite Denmark’s Trade Surplus rising in August. The DKK to GBP currency pair has been trading between the boundaries of 0.1056 and 0.1060.
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Meanwhile the Danish Krone to Euro (DKK/EUR) exchange rate has also experienced losses on Thursday and is presently residing at 0.1343. Denmark’s Balance of Trade rose to 7.4B from 5.1B which was an unexpected jump considering economists had forecast only a 5.8B statistic.
However, Germany’s weakening growth could play havoc with the Danish economy in the near future as Germany imports 15% of Danish exports. As Germany’s economic recovery continues to falter and the Eurozone heads closer to recession, Denmark’s exports could fall, causing economic strain and potential depreciation for the Krone.
Today’s report showed that German orders fell by almost 6% in August, the biggest drop since 2009. Economist Jacob Graven commented: ‘There is a relatively strong correlation between Danish exports and new orders from German companies. The decline in Danish exports is tied to a drop in orders from German companies.’
Germany’s slowdown could pull the 18-nation Euro area closer to recession, something that would impact the Krone further. Figures released from Germany are highly sensitive as it’s the largest economy and renowned powerhouse of the Euro area.
In previous months, while the rest of the Eurozone appeared to flounder in its recovery (bearing in mind Italy recently entered its third recession since the onset of the global financial crisis), Germany remained strong.
However, since the rise of geopolitical tensions in Russia and Ukraine, Germany has began to falter. Both Russia and Ukraine are major German trading partners and in light of the unrest between the two countries and various sanctions, trading has weakened.
Furthermore, as Germany continues to struggle, the European Central Bank has upped its game by slashing interest rates to record lows of 0.05%. Graven continued: ‘Weak growth in the German economy in recent months is one of the main reasons that the European Central Bank has cut interest rates to new record lows. This is the main reason why Danish interest rates are also at record lows.’
Meanwhile, the Pound could experience some movement on Thursday following the Bank of England’s interest rate decision. Although the Bank of England kept their interest rate at the 0.50% benchmark, the last two Monetary Policy Committee (MPC) meetings have seen a divide emerging between policymakers. Two of the nine members have voted in favour of immediate interest rate increases.
Danish Krone to Pound (DKK/GBP) and Euro (DKK/EUR) Exchange Rate Forecast
Friday will see the release of Danish Industrial Production and Inflation Rate figures, which may offer the Krone some support if favourable. Industrial Production in Denmark contracted in July by -6.49%; however, economists have forecast a 2.02% rise in August. Meanwhile, UK Trade Balance and Construction Output figures will also be published.
Another factor that may affect the DKK to GBP and EUR exchange rate will be the International Monetary Fund (IMF) conferences in Washington this week. Friday will see European Central Bank President Mario Draghi speak as well as BoE policymakers such as Kristin Forbes.