Andreas Steno Larsen, Research Analyst at Nordea Markets, suggest that the upward pressure on EUR/DKK is likely to remain into 2019, which leaves an elevated risk of i) FX intervention by the Danish central bank, ii) an independent Danish rate hike (Independent Danish rate hike draws closer) if intervention proves insufficient.
“As the upward pressure on EUR/DKK will intensify in the coming months, the market should start to price in the probability of an interest rate hike by the Danish central bank.”
“Two reasons why the upward pressure on EUR/DKK will remain intact into 2019
Firstly, the geographical asset allocation of the Danish pensions sector has a significant impact on the EUR/DKK rate.
Secondly, we see a large resemblance to the situation that was ongoing into 2013 when the first round of LTRO loans was paid back to the ECB by European banks.”