- 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
AUD/USD regains the constructive outlook above the 200-day SMA
AUD/USD advanced strongly for the second session in a row, this time extending the recovery to the upper 0.6500s and shifting its focus to the weekly highs in the 0.6580-0.6585 band, an area coincident with the 100-day SMA.
EUR/USD keeps the bullish performance above 1.0700
The continuation of the sell-off in the Greenback in the wake of the FOMC gathering helped EUR/USD extend its bounce off Wednesday’s lows near 1.0650, advancing past the 1.0700 hurdle ahead of the crucial release of US NFP on Friday.
Gold stuck around $2,300 as market players lack directional conviction
Gold extended its daily slide and dropped below $2,290 in the second half of the day on Thursday. The benchmark 10-year US Treasury bond yield erased its daily losses after US data, causing XAU/USD to stretch lower ahead of Friday's US jobs data.
Bitcoin price rises 5% as BlackRock anticipates a new wave of capital inflows into BTC ETFs from investors
Bitcoin (BTC) price slid to the depths of $56,552 on Wednesday as the cryptocurrency market tried to front run the Federal Open Market Committee (FOMC) meeting. The flash crash saw millions in positions get liquidated.
FOMC in the rear-view mirror – NFP eyed
The update from May’s FOMC rate announcement proved more dovish than expected, which naturally weighed on the US dollar (sending the DXY to lows of 105.44) and US yields, as well as, initially at least, underpinning major US equity indices.