The GBP to DKK exchange rate is currently bearish, with potential for further declines.
Key drivers include the interest rate differential, with the Bank of England expected to cut rates to 3.25% by mid-2026, while the Danish central bank maintains a lower rate, currently at 1.85%. This divergence is significant for currency value. Additionally, UK inflation is forecasted to decrease towards the central target, further impacting the pound. In contrast, the Danish economy is projected to maintain stable inflation and moderate wage increases, supporting the krone's stability.
In the near term, the exchange rate may trade within a narrow range around current levels, reflecting recent stability around a 2.1% range. A potential upside risk could arise from stronger-than-expected UK economic indicators, while a downside risk may come from deteriorating trade relations or further fiscal pressures in the UK, which could exert more downward pressure on the pound.