EUR/DKK to stay close to the central rate – Danske Bank

Danmarks Nationalbank (DN) hiked its key policy rate 25 bps to 3.60% after the ECB increased its key policy rate 25 bps earlier. EUR/DKK trades close to the central rate. Economists at Danske Bank analyze the pair’s outlook.

End of the hiking cycle

DN hiked its key policy rate 25 bps to 3.60%. The rate increase follows the decision by the ECB earlier, which increased its policy rates 25 bps to 4.00%.

We expect the rate hikes to mark the end of the hiking cycle in the Euro area and in Denmark and next move to be a rate cut in the summer of 2024. 

EUR/DKK trades close to the central rate. We expect it to stay here and thus for DN to follow future interest rate changes from the ECB 1-to-1. I.e. we do not expect DN to make any unilateral adjustments of the policy rate spread, which is currently -0.40pp. It means we expect DN to keep its key policy rate unchanged at 3.60% until next summer.