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Denmmark: Central bank holds rates despite ECB - Danske

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 10, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    The central bank of Denmark (DN) kept rates unchanged today despite European Central Bank moves. According to analysts at Danske Bank, the DN will hold rates for a foreseeable future like the ECB.

    Key Quotes:

    “Danmarks Nationalbank (DN) this afternoon announced that it keeps interest rates unchanged. The interest rates on certificates of deposit is thus maintained at -0.65%, and the EUR-DKK monetary policy rate spread is thereby narrowed from -0.35% to -0.25%.”

    “We do not expect any further rate changes in Denmark for a foreseeable future as well. However, as we have noted earlier, we expect DN to follow its normal reaction function, meaning that DKK10-20bn FX intervention outflow most likely will trigger an independent rate hike, thereby narrowing the spread between DN and ECB policy rates further.”

    EUR/DKK has dropped back below 7.46 again and we do not expect that DN will allow EUR/DKK to fall below 7.45 in order to avoid a repeat of the 2014-scenario. If EUR/DKK depreciates further, DN will probably cut the interest rates on certificates of deposit to -0.75%, which is the lower bound on the policy rate, and step up FX interventions. DN can sell unlimited amounts of DKK when foreign exchange is flowing into Denmark.”
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