In last month, the Danish central bank intervened in the FX market by purchasing total amount of DKK 230bn, and thereby reduced its currency reserve to DKK 484bn at present.
The governing council of the ECB scheduled to meet today is expected to discuss on deposit rate cut and expansion of current asset purchasing program. Even if the ECB cut its deposit rate, the Danish central bank is unlikely to response the rate cut with a CD rate cut.
"We expect the bank to stick with this strategy in the current situation. In other words, if the ECB cuts its deposit rate, the central bank will keep rates unchanged. And if this lower rate spread triggers renewed DKK strengthening versus the EUR, this pressure will be mitigated through currency reserve accumulation", says Nordea Bank.
