- Danmarks Nationalbank (DN) purchased FX for DKK2.4bn in intervention in October – it marked the second straight month of intervention.
- We expect the ECB to strike a more dovish tone at Thursday’s meeting, which could intensify the present downwards pressure on EUR/DKK and force DN to make additional FX intervention purchases.
- We expect DN to cap EUR/DKK downside around the present level of 7.4430 and forecast EUR/DKK at 7.4475 in 1M and 3M after a 10bp unilateral DN rate cut.
At present EUR/DKK is trading around the 7.4429 low and, as we expect the ECB to strike a more dovish tone, there is definitely a risk, in our view, that the downward pressure on EUR/DKK could mount in the near term. We expect DN to cap EUR/DKK downside around the present level. Furthermore, around DKK10-20bn in intervention purchases would trigger a 10bp unilateral rate cut.
Note, though, that the de facto lower trading bound for EUR/DKK since 1999 is 7.4234 and the official ERM2 lower bound is 7.29252. Hence, DN also has the option of letting EUR/DKK decline further.
We forecast EUR/DKK at 7.4475 on 1M and 3M horizons on the back of a 10bp unilateral DN cut of the rate of interest on certificates of deposits (CD rate) before the end of the year. The rate cut will bring the CD rate to minus 0.15%. We forecast EUR/DKK at 7.4450 on 6M and 12M
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.