If you're a Briton thinking of emigrating to Thailand in 2019, either to retire or buy a condo, there's news about the exchange rate that you may find useful.
To be specific, the pound to baht interbank exchange rate stands at 41.02 today at the time of writing, its weakest in over 11 weeks, or since February 24th.
In part, the baht has strengthened, as Thailand's Electoral Commission this week announced the results of Thailand's recent election, which favour the pro-army PPRP party.
In addition, the THB has risen, because the USA and China look set to continue their trade talks, even though America has lifted its tariffs on China. Successful trade talks would benefit Thailand's exports sector.
Meanwhile, in the UK, economic growth has accelerated, but largely because manufacturers are stockpiling ahead of Brexit. At the same time, the Conservatives and Labour’s cross-party talks have broken down.
Let's take a further look at how these factors have affected the pound to baht exchange rate, and the outlook for GBP vs THB for the rest of 2019.
You may find this useful to keep in mind, for when you transfer money from the UK to Thailand, to buy a condo in bustling Bangkok, or retire to enjoy the beautiful beaches of Phuket.
Baht Gains, as Thai Electoral Commission Announces Election Results
A first factor why the pound to baht interbank exchange rate has reached this 11-week low is because, this Wednesday 8th May, Thailand's Electoral Commission (EC) at last released the results of Thailand's general election from six weeks ago. According to the EC, the results favour the governing, pro-army PPRP party.
To look back, on March 24th this year, Thailand held its first elections since the military-backed coup in 2014. This coup installed General Prayut Chan-o-cha as Thailand's Prime Minister.
Since the elections, Thailand's Electoral Commission has been deciphering the results, and this Wednesday it made the results public.
According to the EC, General Prayut's pro-army Palang Pracha Rath (PPRP) party won 115 seats in Thailand's lower house. Meanwhile, Thaksin Shinawatra's main opposition Pheu Thai Party won 136 seats in the lower house. This is out of 500 seats in Thailand's lower house.
However, the 250 seats of Thailand's upper house, the Senate, are chosen by Thailand's military. As a result, the pro-army PPRP has won 365 seats out of the total 750, just 11 seats short of the 376 majority need to elect the Prime Minister. As a result, it's likely that the PPRP will work with smaller parties, to re-appoint General Prayut.
These election results have strengthened the baht, because they point to stability in Thailand's government and economic policies.
For example, on April 30th, Thailand's government unveiled a new economic stimulus package, to shore up Thailand's GDP (Gross Domestic Product) growth this year. This package includes tax breaks for domestic tourism, and welfare for low-income workers.
In turn, global money managers favour this stability in Thailand's political and economic outlook. This is because greater stability helps them to better predict the return on their investments, so encourages investors to place money in Thailand.
As a result, investors have bought the THB, lifting its value, in anticipation that General Prayut will remain as Prime Minister.
THB Strengthens, as USA and China Continue Trade Talks
In addition, a further factor why the pound to baht interbank exchange rate has weakened is because the USA and China are continuing their trade talks. It's hoped that, if Washington and Beijing's negotiations are successful, this will boost global trade, and Thailand's export sector.
This morning, the USA raised its tariffs on $200 billion of Chinese tariffs, up to 25% from 10%. According to US President Donald Trump, this is because China "broke the deal" about previously-agreed trade provisions between the two countries.
As a result, the world's stock markets have fallen, in anticipation that global economic growth will now slow in 2019.
However, in spite of this, the United States and China continue their trade talks, to resolve their differences.
For example, this Thursday 9th May, Chinese Vice-Premier Liu He arrived in Washington, for an 11th round of negotiations with America. In addition, President Trump announced that he's received a "beautiful letter" from China's President Xi Jinping.
In particular, according to Mr. Trump, Mr. Xi's letter asks the USA and China: "Let’s work together, let’s see if we can get something done". The American President said after receiving the letter that “I like the President a lot", "he’s a good friend of mine", and that they'll "probably" talk by phone.
The USA and China's trade talks will continue today. With this in mind, it's hoped that, even though America has raised its tariffs on China, the world's two largest economies can still reach a trade agreement.
If so, this would spur the export sectors of third-party countries, like Thailand, who trade lots with both the USA and China. So this has helped strengthen the Thai baht.
Pound Weakens, on Brexit Stockpiling, Cross-Party Talks Break Down
What's more, another partial explanation why the GBP to THB interbank exchange rate has reached this 11-week low is because, in the UK, economic growth has accelerated, but only because businesses are stockpiling, ahead of Brexit.
In addition, the Conservatives and Labour Parties' cross-party Brexit talks have broken down.
This morning, the Office for National Statistics (ONS) revealed that UK GDP (Gross Domestic Product) expanded by +0.5% in Q1, between January and March.
This is well ahead of Q4 2018's +0.2% growth, so is a marked acceleration. On an annual basis, the UK economy expanded by +1.8%, above the previous three months' annualised +1.4% growth.
That said, a key reason why the UK economy accelerated in early 2019 is because UK manufacturers produced more goods, to stockpile in case there's a 'No Deal' Brexit.
By comparison, the UK's services and construction sectors, which together make up roughly 90% of the economy, both contracted by -0.1% between January and March.
Furthermore, the UK's Brexit uncertainty may continue. This is because the Tories and Labour's cross-party negotiations, to agree a form of Brexit to pass through the House of Commons, have broken down.
In particular, Labour sources told the BBC that the government was being "disingenuous" about entering a trade deal with the EU, once the UK exits.
So to sum up, the pound to Thai baht interbank exchange rate has hit an 11-week low. This is because the results of Thailand's general election favour political and economic stability, and because the USA and China continue their trade talks.
What's more, looking ahead, these factors could continue to affect the GBP to THB exchange rate.
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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email [email protected]