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GBP/THB: Pound to Thai Baht on Shaky Ground

GBP/THB: Pound to Thai Baht on Shaky Ground

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GBP/THB remains under pressure, despite the British Pound firming from the lows against the USD yesterday after the UK announced a new Prime Minister.

The British pound reversed earlier losses against the US dollar on Monday after the Conservative party appointed Liz Truss as the country’s new leader. However, GBP performed less well against the Thai baht.

The baht’s strength against the pound is in stark contrast to its performance against the greenback. Undoubtedly, this is because of the UK’s precarious situation.

Even though Truss’ appointment is viewed as constructive, her ambitious spending plans will considerably increase the nation’s debt burden. Initial estimates predict the new P.M’s measures to combat the cost-of-living crisis could set the Treasury back £50 billion per year. Considering the UK economy is grinding to a halt, increasing government borrowing at the worst time possible may not be prudent. Taking this into account, the British pound could be in for a bumpy ride.

On the other hand, the land of smiles, Thailand, faces its own problems. MUFG bank forecast that external headwinds will weigh on Thailand’s economy heading into next year.

A cloudy external environment may weigh on Thailand’s exports and GDP growth. We now forecast GDP growth at 2.9% and 3.5% for 2022 and 2023, down from 3.4% and 4.0% prior.

MUFG also cites the Bank of Thailand’s (BoT) reluctance to increase the pace of rate hikes as another potential landmine lying in the path of Thailand’s recovery.

We expect 75 bps of rate hikes in 2022 and 2023 which may pale in comparison to other central bank’s tightening.

Regardless of the Thai baht’s forecast weakness against the US dollar, its outlook against the pound remains rosy. For this reason, if you’re planning to send money to Thailand from the UK, now might be a good time to pull the trigger.

Pound to Thai Baht Forecast

The daily chart shows GBP/THB is trading inside a descending bearish trend channel. Furthermore, the rate is below the 100-Day Moving Average (DMA) at 43.39 (blue), and working towards the significant 200-DMA at 41.66 (red). A close below the 200-DMA should result in a test of the lower edge of the trend channel at 41.00. And below that, there’s nothing standing in the way of a drop into the 39.00 – 40.00 trading range.

Theoutlook only improves if GBP/THB remains above the 200-DMA. The longer it spends above the long-term indicator, the greater the odds of a reversal. If this plays out, the 100-DMA is the first technical resistance level. Closely followed by the 50-DMA at 43.91 (green).

All things considered, the immediate outlook is neutral to bearish, with a test of the 200-DMA expected in the coming days.

GBP/THB Price Chart

Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.