EUR/DKK: Tighter DKK liquidity to save Nationalbanken – Nordea

Andreas Steno Larsen, an analyst at Nordea, reviews the outlook for the EUR/DKK pair and the next steps expected to be taken by the Danish central bank. EUR/DKK is trading at 7.4720 right now.

Key quotes

“We are not ready to call an independent rate hike (Danish central bank intensifies its intervention) as we think that the upside pressure in EUR/DKK spot will abate fairly soon.”

“Excess DKK liquidity in the commercial banking system will dwindle swiftly over the coming weeks. (...). Less DKKs in the financial system, a stronger DKK spot outlook.”

“A 50-60 pips move lower in EUR/DKK is expected into the end of Q1 (solely from a tighter DKK liquidity).”

“For now, the Danish central bank can take comfort in the tigther DKK liquidity outlook, why we don’t think independent rates action is on the cards in Denmark anytime soon.”