FXstreet.com

FX Crossroads

This report has been deactivated

8

0

Monetary policy and the link to FX: DKK and GBP

Wed, Nov 12 2008, 15:16 GMT
by Danske Research Team

Danske Bank A/S


Summary and conclusions

• After two independent Danish rate hikes, major interventions from the Danish central bank, the DKK has received a lot of attention - both from domestic and foreign market observers. We take a closer look at September's flow of funds data, the first Danish 30Y Govt bond auction in 14 years, and evaluate the outlook of a tighter policy rate spread between Denmark and Euroland, and for EUR/DKK. We foresee a narrowing of the rate spread in the near term and see EUR/DKK trading in the 7.44-45 range in the coming months.

• Bank of England's Quarterly Inflation Report was not cheering reading; the UK economy is set to contract in 2009 and inflation could fall below BoE's pain threshold of 1% in the forecast horizon. Despite the downbeat projections, we pencil in four reasons to be GBP bullish against EUR in the medium term.

• We take a look at relative economic surprises compared to movements in exchange rates. Unfortunately, we are unable to detect a strong relationship. However, important qualitative conclusions can be drawn. For example, the strong dollar rally in recent months coincides with a period of much more negative data surprises in Euroland than in the US. Given this observation, it is worth noting that data has recently turned a lot sourer in the US than expected. This suggests that the USD rally could loose steam.

• FX Crossroads is published every second Wednesday. Next publication date is 26 November.


Interested in forex trading? forex brokerage firms!


MG Financial Group
Contact the broker/FDM
Open a demo account
FOREX.com
Contact the broker/FDM
Open a demo account
CitiFX Pro
Contact the broker/FDM
Open a demo account		Saxo Bank A/S
Contact the broker/FDM
Open a demo account		Capital Market Services, L.L.C.
Contact the broker/FDM
Open a demo account

GET CASH BACK FOR YOUR TRADES!   Learn more about the Pip Rebate Program

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

©2009 "FXstreet.com. The Forex Market" All Rights Reserved.