ECB and Fed Rate Hikes Weaken Danish Kroner Amid Global Uncertainty

Since the outbreak of war in the Middle East in February, both the European Central Bank (ECB) and the Federal Reserve in the US (Fed) have tightened monetary policy by raising interest rates. This has led to a rise in market expectations for policy rates in both the euro area and the US.

During this period, the Danish krone has gradually weakened against the euro, prompting Danmarks Nationalbank to make minor interventions in the foreign exchange market in June and August. The bank followed the ECB's policy rate hikes of 25 basis points in June and September, keeping the monetary policy spread unchanged at -40 basis points.

According to Danmarks Nationalbank, monetary policy and financial conditions are currently broadly neutral for the Danish economy.