The Danmarks Nationalbank (DN) has increased the sale of DKK. More intervention is expected, but there is a high level of patience before the next line of defense will be activated. Therefore, an independent interest rate cut is still not imminent, economists at Nordea report.
Markedly higher intervention from the Danish central bank
"In March the Danish central bank sold DKK17.0 B in the currency market to counter strengthening of the krone against the euro. This was the second consecutive month that the central bank had to intervene to keep the EUR/DKK cross within the desired range and the scale of intervention was markedly higher compared to DKK0.4 B in February.”
“As usual the central bank has not revealed the exact EUR/DKK level where it intervened in February. However, judging from the development in EUR/DKK during the month, it seems like a level slightly above 7.435 marks the lower tolerance level for the central bank at the current juncture.”
“The Danish central bank most likely sees the current downward pressure on EUR/DKK as a welcome opportunity to provide more excess liquidity to the Danish money market. This implies that the central bank is expected to intervene for at least DKK50 B before an independent interest rate cut comes into play.”
“The big test for this anticipated patience at the central bank will most likely come in May. In our main scenario we expect the Danish central bank to withstand the pressure and thereby keep the deposit rate unchanged at -0.50%. But if the pressure gets too intense, the central bank is likely to sanction an independent interest rate cut of 10bp on both the deposit rate and the lending rate.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.