EUR/DKK Downside Risk Intact As Currency War Escalates

Danmarks Nationalbank’s (DN) decision yesterday to hike rates implicitly through an increase in banks’ current account limit is in clear contrast to other central banks’ easing monetary policy this week. There is a clear risk that the move was premature and that downside pressure on EUR/DKK could resume in the coming months. We forecast EUR/DKK at 7.4490 and DN to keep policy rates unchanged in 12M. We expect DN to cap EUR/DKK at 7.4440 using FX intervention purchases.

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