Nationalbanken solgte 17 milliarder kroner i marts for at bremse kronens stigning over for euroen. Nordea vurderer, at Nationalbanken er parat til at sælge yderligere 50 milliarder kr., før banken vil gribe til en rentesænkning. Testen kommer i maj.
Markedly higher intervention from the Danish central bank
The Danish central bank has increased the sale of DKK. More intervention is expected, but there is a high level of patience before the next line of defense will be activated. Therefore, an independent interest rate cut is still not imminent.
In March the Danish central bank sold DKK 17.0bn in the currency market to counter strengthening of the krone against the euro. This was the second consecutive month that the central bank had to intervene to keep the EUR/DKK cross within the desired range and the scale of intervention was markedly higher compared to DKK 0.4bn in February.
Chart 1: Intervention and EUR/DKK
As usual the central bank has not revealed the exact EUR/DKK level where it intervened in February. However, judging from the development in EUR/DKK during the month, it seems like a level slightly above 7.435 marks the lower tolerance level for the central bank at the current juncture.
Great patience at the central bank
The key reason for the current downward pressure on EUR/DKK is the very low excess liquidity that spills over to a very large spread between money market rates in Denmark and the Euro area. The foundation for this low liquidity was laid back in March 2020 when the central bank bought more than DKK 60bn to counter a strong pressure for a weaker DKK.
In that perspective the current sale of DKK can be seen as a reversal of the event that took place during the intense market volatility last year. Therefore, in our view, the Danish central bank most likely sees the current downward pressure on EUR/DKK as a welcome opportunity to provide more excess liquidity to the Danish money market. This implies that the central bank is expected to intervene for at least DKK 50bn before an independent interest rate cut comes into play
The big test will come in May
The big test for this anticipated patience at the central bank will most likely come in May. As described in the research note DKK: A cut in May or it will go away EUR/DKK holds a strong seasonal pattern that likely will increase the pressure for a weaker Danish krone next month.
In our main scenario we expect the Danish central bank to withstand the pressure and thereby keep the deposit rate unchanged at -0.50%. But if the pressure gets too intense, the central bank is likely to sanction an independent interest rate cut of 10bp on both the deposit rate and the lending rate.
