Both battered and flattered by global events over the past four years, the pound sterling is reaching a crunch point.According to Bloomberg, the British currency will slump to about US$1.25 by mid-2021 if there is no trade agreement with the EU, yet only rise to about US$1.35 if there is a done deal before Christmas.On these scenarios, in baht terms, the pound could decline to about 36.5 baht (money changer rate) or improve to 42 baht.It’s a much narrow range than hitherto envisaged.
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Leaving with no agreement at all would bring additional difficulties to UK businesses in the form of new barriers and quotas.There is also a strong likelihood of the UK adopting negative interest rates (following the European Central Bank and the Bank of Japan) to make it unattractive for corporations and individuals to keep cash on deposit, but that move is unprecedented for the British pound with debatable consequences.On the other hand, a UK-EU trade agreement would not bring a big bonus for the pound as that has already been built into speculators’ assumptions.
On the baht side, Thailand’s currency is still rising.The government blames currency speculators, but a more likely explanation is the strength of the country’s fundamentals such as a healthy current account surplus and a rise in the value of exports.Although the country’s economy has been blighted to an extent by the coronavirus pandemic, that’s equally true well-nigh universally.Indeed, many current speculators believe that effective Covid vaccines in 2021 could prove more influential in currency movements next year than trade balances alone.
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