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26 Feb 2015
EUR/DKK could head lower in the near term – JP Morgan
FXStreet (Edinburgh) - Analysts at JP Morgan recommend shorting the cross in light of the increasing intervention by the DB and the uncertainty surrounding the central bank’s future steps.
Key Quotes
“Pressure on the EUR/DKK continued to escalate this week. Daily data releases show that banks’ net positions with the DNB have increased by DKK 179bn month-to date (through the 18th)”.
“This compares to an increase of DKK 84bn in the entire month of January and thus implies a substantial increase in pace of FX interventions by the DNB this month”.
“By our estimates, Denmark's FX reserves have now increased by 12% of GDP month-to date to 42% of GDP”.
“While this is still only half of SNB’s FX reserves of 85% of GDP when they abandoned the floor, the speed of the increase has caught us by surprise and suggests that the pressure will be ongoing”.
“The base case is for the DNB not to abandon the peg but we recommend initiating short EUR/DKK via forwards any way to position for the tail outcome”.
“There appears to be an ongoing debate on what future action the DNB will undertake”.
Key Quotes
“Pressure on the EUR/DKK continued to escalate this week. Daily data releases show that banks’ net positions with the DNB have increased by DKK 179bn month-to date (through the 18th)”.
“This compares to an increase of DKK 84bn in the entire month of January and thus implies a substantial increase in pace of FX interventions by the DNB this month”.
“By our estimates, Denmark's FX reserves have now increased by 12% of GDP month-to date to 42% of GDP”.
“While this is still only half of SNB’s FX reserves of 85% of GDP when they abandoned the floor, the speed of the increase has caught us by surprise and suggests that the pressure will be ongoing”.
“The base case is for the DNB not to abandon the peg but we recommend initiating short EUR/DKK via forwards any way to position for the tail outcome”.
“There appears to be an ongoing debate on what future action the DNB will undertake”.