We have now updated our thoughts on DKK for the 2nd half of the year. These are below:
Danish krone was barely mentioned in the first half of the year as the political risk from the Dutch and French elections that some market participants had threatened may cause traders to target the peg between the krone and the euro, failed to materialise. That is not to say that an overt strengthening of the euro does not cause its own issues, but the Danmarks Nationalbank will have been pleased that market volatility has been so low. We see no reason for this to change in the second half of the year.
Conclusion: We expect DKK to remain very quiet through the 2nd half of the year
The Danish central bank spent a lot of 2016 intervening in markets in a bid to weaken the krone as investors bid the DKK higher on fears of the UK referendum. Unlike most central banks the Danmarks Nationalbank has only one job; to protect the peg of the krone with the euro and watched the polls nervously.
They were unprepared for the move by the Swiss National Bank in 2015 year and managed to hold the peg in place.
To their credit they weathered the Brexit storm pretty well although there has been some volatility to contend with. DKK never quite reached the highs it hit versus the euro in the aftermath of the Swiss franc floor collapse and has managed to settle down as the political remains are picked over.
There is a limit on how strong the DKK can get given the fatigue of pushing Danish debt yields further below 0% but the DNB will remain nervous as long as London remains a circus. As Europe becomes increasingly circus like we see similar risks emerging for the DKK in 2017.
Want to learn more? Check out our full list of 2017 currency predictions or drop us a line to research@worldfirst.com with any questions.