13 May 2015
EUR/DKK peg under pressure? – Rabobank
FXStreet (Edinburgh) - Jane Foley, Senior FX Strategist at Rabobank, sees the possibility of the EUR/DKK peg to be under pressure.
Key Quotes
“The aggressive monetary easing announced by the DNB at the start of the year was oriented at protecting the EUR/DKK ERMii peg”.
“The impact of that policy is now lending support to economic activity”.
“The DNB expects growth at 2.0% this year and to remain at that level in 2016 and 2017. The Bank has candidly pointed out that “there is no deflation”.
“For a central bank clouded with a deflationary risk, it will always be easier to weaken its currency, as the DNB was trying to do this year”.
“However, once the deflationary risk is removed, aggressively easing could raise the risk of medium-term inflation”.
“It follows that if CPI inflation begins to head higher in Denmark, speculators may yet have reason to bet against the EUR/DKK peg”.
Key Quotes
“The aggressive monetary easing announced by the DNB at the start of the year was oriented at protecting the EUR/DKK ERMii peg”.
“The impact of that policy is now lending support to economic activity”.
“The DNB expects growth at 2.0% this year and to remain at that level in 2016 and 2017. The Bank has candidly pointed out that “there is no deflation”.
“For a central bank clouded with a deflationary risk, it will always be easier to weaken its currency, as the DNB was trying to do this year”.
“However, once the deflationary risk is removed, aggressively easing could raise the risk of medium-term inflation”.
“It follows that if CPI inflation begins to head higher in Denmark, speculators may yet have reason to bet against the EUR/DKK peg”.