Denmark markets and tariffs volatility

Due to recent market volatility, this edition is published today (Wednesday) instead of tomorrow morning, to keep up with current events. Next week, the publication will take an Easter break.

Macro. Even though the US is by far the biggest Danish export market, the direct impact from tariffs on the economy is relatively small. In the event of a more severe economic slowdown, consumers have a relatively good starting point and there is plenty of room for loosening fiscal policies.

FX. The stock market slide sent EUR/DKK to the highest level since 2020. There is still a way to go before it hits the central bank’s upper FX intervention target, which was around 7.4730 in 2020 and possibly higher today, e.g. 7.4750. Despite the rise, we think it is too early for a tactical short position due to the big discount in FX forwards.

STIR. Liquidity conditions continue to ease, and the government's agreement to purchase Copenhagen Airport is likely to be finalised in June, significantly increasing the net position. The FX forward market remains cautious about fully pricing in normalisation following the rise in EUR/DKK and the small risk of FX intervention.

Bonds. DGBs reacted more to the risk of a rate hike than DKK swaps (combined with the risk-off sentiment). Hence, the medium-term segment on the Danish government bond yield curve looks cheap relative to swaps and matching German govts.

Download the Full Report!