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Pound to Danish Krone (GBP/DKK) Exchange Rate Rangebound as Bank of England Cools Negative Interest Rate Fears

September 22, 2020 - Written by John Cameron

GBP/DKK Exchange Rate Steady as UK Government Announces New Covid-19 Restrictions

The Pound to Danish Krone (GBP/DKK) exchange rate held steady today, with the pairing currently trading around 8.109kr.

Sterling benefited from the playing down of negative interest rates from Bank of England’s (BoE) Governor Andrew Bailey today.

As a result, GBP investors gave a sigh of relief after concerns of a negative interest rate held back prospects for Britain’s economic recovery.

However, Prime Minister Boris Johnson has announced that new coronavirus restrictions could ‘remain in force for six months’.

New measures will include a curfew on pubs and restaurants along with recommendations to work from home if possible.

Mr Johnson warned:

‘I am sorry to say that - as in Spain and France and many other countries - we have reached a perilous turning point.

‘A month ago, on average around a thousand people across the UK were testing positive for Coronavirus every day. The latest figure has almost quadrupled to 3,929.

‘Yesterday the chief medical officer and chief scientific adviser warned that the doubling rate for new cases could be between seven and 20 days with the possibility of tens of thousands of new infections next month.’

Consequently, we could see the GBP/DKK exchange rate fall later on into today’s session as Britain’s economic outlook continues to darken as new restrictions place further pressure on the economy.

Danish Krone (DKK) Steady as Danish Consumer Confidence Sinks in September

The Danish Krone (DKK) rose today despite worsening Danish consumer confidence. September’s consumer morale gauge revealed that sentiment had fallen from -5.5 to -7.4.

As a result, this has steadied the DKK/GBP exchange rate as Danish markets remain notably cautious about the nation’s economy for the months ahead.

DKK investors are also becoming more optimistic about Denmark’s economy after reports that Denmark would deepen its collaboration with China, the world’s second-largest economy.

Jakob Linulf, consul general of Denmark in Shanghai, explains:

‘Danish food exports like pork, as well as dairy products like milk, butter and cheese, have been very successful in the Chinese market.’

GBP/DKK Outlook: Brexit Uncertainty and New Covid-19 Restrictions to Weigh on Pound

Pound (GBP) investors will be awaiting tomorrow’s release of the flash UK Services PMI for September. If this improves, then we could see Sterling claw back some of its losses against the Danish Krone.

Meanwhile, Danish Krone (DKK) investors will be focusing on Denmark’s own coronavirus situation. If the infection rate continues to climb, then DKK could suffer.

The GBP/DKK exchange rate will likely remain subdued this week as the UK faces another round of coronavirus restrictions. Consequently, this will dampen the outlook for Britain’s already struggling economy, particularly as uncertainties over Brexit continue to linger.

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