Diverging monetary policies of Denmark and the Eurozone are likely to continue as the Danish central bank has hiked rates, while the ECB has suggested at new rate cuts. Danish rates are seen at current levels until mid-year, followed by moderate rise particularly in the long term. However, this rise in interest rate will be less than the previously anticipated.

Danish central bank finds it difficult to normalise its monetary policy as ECB continues to be aggressive on its stance. Moreover, weak krone as compared to the euro, continuous intervention by the central bank and low excess liquidity in the money market suggest that the bank could hike rates in a period when the ECB is expected to ease further.

"In our baseline scenario we assume that despite the more accommodative monetary policy pursued by the ECB, the Danish central bank will raise its CD rate by 10 bp within the next three months. ...Slightly longer term, we do not see the need for more independent rate hikes, leaving the CD rate at -0.55% towards the end of 2017 - obviously assuming that the ECB will stay on hold once it has made its expected easing moves"  - Nordea Markets