The DKK usually strengthens in May, likely because of the dividend season. Material intervention could be on the cards, why it is a “cut in May or it will go away” scenario, Andreas Steno Larsen, Chief Global FX/FI Strategist at Nordea, informs.
EUR/DKK is lower in May 86% of May’s since 2000
“The DKK usually strengthens during May due to the dividend season, which could lead to renewed material intervention, which brings a rate cut into play, but we still judge that the probability is (clearly) below 50% for an independent rate cut before summer.”
“The cut is potentially in play in May, but it will likely take >30 B DKK worth of intervention in May. Intervention of roughly that magnitude has only occurred in May 2009, 2010 and 2016, and only once has intervention surpassed 30 B DKK in May. April is usually an ‘intervention-light’ month.”
“It is an either a cut in May or it will go away scenario, since the seasonal patterns in EUR/DKK turn from June and onwards, also since the equity market on average turns less benign from late May to September.”