FX intervention is expected to support EUR/DKK if Italy votes ‘No’ – Danske Bank

Chief Analyst at Danske Bank Jakob Christensen assesses the potential scenario for the Danish Krone in case of a ‘No’ win at the Italian referendum on Sunday.

Key Quotes

“On Sunday, Italy is set to hold a referendum on changes to the constitution”.

“Opinion polls indicate that it will be a 'no', which could result in political uncertainty in Italy if the government steps down”.

“That could weigh on the EUR/DKK spot and FX forwards if the markets speculate that the situation could potentially lead to an Italian exit from the EU and the EUR”.

“We doubt that it will come to this though, as EU opposition in Italy has fallen in recent months”.

“Nevertheless, if the market looks to DKK as a safe haven from EUR woes, we expect Danmarks Nationalbank to cap EUR/DKK downside at around 7.4350 using FX intervention”.