EUR weakness could threat EUR/DKK peg – Rabobank

FXStreet (Edinburgh) - Jane Foley, Senior Currency Strategist at Rabobank, sees the possibility that the EUR/DKK could be challenged if the euro resumes its downside.

Key Quotes

“Currently Denmark’s CPI inflation stands at a modest 0.6% y/y”.

“However, consumer confidence and retail sales data are firm – perhaps in response to the fact that rates on mortgage refinancing loans have dropped on the back of the DNB’s policy measures”.

“Coincidentally, the unemployment rate has dropped to its lowest level since 2009”.

“The DNB’s projections on CPI inflation rise from 0.5% y/y this year to 1.8% y/y in 2016”.

“Over the past month, the pace of the EUR’s broad based decline has ebbed, lending some respite to the DNB and other European central banks”.

“However, if the EUR were to regain its downside momentum, it could be difficult for the DNB to maintain its EUR/DKK peg without igniting domestic inflation”.

“While our central view remains that the EUR/DKK peg will sustain, the DNB will likely be watching the EUR movements this year with baited breath”.