GBP

[Ticker2000]

Perfect Storm

1. Tapering commencing before markets in the main expected. Some priced in but not all. Constant reduction for another 8 months which will leave pressure on the THB throughout.

2. Slowdown here before the the protests. Resultant base rate reduction. More to come?

3. Protests compounding the economic slowdown.

4. Bombs now in Songkla and Phuket.

5. US/UK moving in the right direction economically - hot money wanting to take advantage of the upturn.

6. Protest look like they could stay here for sometime which has disappointed the markets hoping for a return to some form of stability with the dissolution.

7. Investors stating to label Thailand a barmy state.

8. Companies questioning whether it is a safe base for the SE Asian operations.

9. The generals starting to grumble.

The list goes.

Suspect it will touch the 55/56 resistance quite soon. However to get past that would be very tough.

If this all continues the way it is looking 55/60 is a possibility. Past that I doubt due to all the extra liquidity in the market.

But heyho if the markets have had enough with Thailand you never know.

Worth looking at the slide from the 60's to the 40's in 2008 from when QE was introduced July/August. Went from circa 66 to 49 in 5/6 months. It was in direct correlation with the implementation of QE. Could we see the same thing again but over the 8 months of tapering.

[i claudius]

We can but hope ,i am waiting before i bring any more money over ,as i now work on 48 to the pound ,i am better off .

[PattayaPhom]

QE started 2009 in the UK, interest rate cuts were the main factor in the collapse of Stirling from mid 60s to mid forties in Feb 2009

[Ticker2000]

QE started 2009 in the UK, interest rate cuts were the main factor in the collapse of Stirling from mid 60s to mid forties in Feb 2009

Look at the US QE.

[AyG]

QE started 2009 in the UK, interest rate cuts were the main factor in the collapse of Stirling from mid 60s to mid forties in Feb 2009

I think your memory may be failing you. It peaked around 56 in 2009 - not the mid 60s.

Incidentally, I don't think interest rate cuts were a significant factor. There's been a long term decline in the value of sterling against the Baht. See, for example, http://postcardsfromthailand.com/2011/01/sterling-worthless/

[chiang mai]

The title says GBP yet most of the dialogue in the OP relates to THB, regardless, a few points:

1 - as those expats here who have been through previous bouts of political unrest will tell you, the current turmoil will likely end quite suddenly even though there may be periods of intensity before hand, this is not something that will last for years in its present state - I think the "Phuket bombs" item on your list is a red herring and if the "generals are starting to grumble", that's a benefit not a constraint.

2 - I will not be surprised if THB falls further in the first part of 2014 although like you I have 57 as the floor, thereafter I expect THB to strengthen.

3 - the UK just recorded its worst ever deficit, 20 bill as I recall (?) and the noise about the wrong kind of recovery is deafening - I see that the risks have increased, despite the recent upturn.

4 - if (US) QE tapering is to continue along the lines imagined (and that's far from certain), that means a stronger USD, in that event I would look for GBP to be weaker against USD and for that to benefit the THB side of GBP/THB.

5 - the US recovery if far from certain and as a consequence QE tapering is not set in stone. US mortgage approvals just hit a 13 year low as a result of the first tapering announcement, expect GDP to be hit as a result. http://www.nytimes.com/reuters/2013/12/24/business/24reuters-usa-economy-mortgages.html?ref=business&_r=1&

6 - I would not be too concerned about the country being labelled a barmy state, ultimately, investor money will go where the best return and lowest risk exists and that certainly doesn't preclude Thailand once the current unrest has stabilized.

I suppose in very simplistic and broad terms we can divide the year into two parts (although not necessarily of equal duration) - in the first part the baht could easily devalue and favour holders of GBP, in the second part the obverse will be true.

[Ticker2000]

QE started 2009 in the UK, interest rate cuts were the main factor in the collapse of Stirling from mid 60s to mid forties in Feb 2009

I think your memory may be failing you. It peaked around 56 in 2009 - not the mid 60s.

Incidentally, I don't think interest rate cuts were a significant factor. There's been a long term decline in the value of sterling against the Baht. See, for example, http://postcardsfromthailand.com/2011/01/sterling-worthless/

It fell from mid 60's from July 2008 to 49 at the end of January 2009.

This was in direct correlation with the laying out of US QE. The Uk QE is of know consequence when placed next to the US.

I was always referring to the US QE albeit I did not spell it out.

[davejones]

Why do you think there will be a constant reduction in QE over 8 months. No-one has mentioned that and I don't know a single other person who thinks it will happen like that QE in the US could go on for years. It is bound to be increased at times when things start falling apart again, which is more or less a certainty. I wouldn't be surprised to see even bigger QE than we have now sometime over the next few years. This is a very long way from the end.

[Ticker2000]

Why do you think there will be a constant reduction in QE over 8 months. No-one has mentioned that and I don't know a single other person who thinks it will happen like that QE in the US could go on for years. It is bound to be increased at times when things start falling apart again, which is more or less a certainty. I wouldn't be surprised to see even bigger QE than we have now sometime over the next few years. This is a very long way from the end.

Do your research - dozens of links out there.

http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1202&MainCatID=12&id=20131226000060

http://www.bloomberg.com/news/2013-12-20/fed-seen-tapering-qe-in-10-billion-steps-in-next-seven-meetings.html

Many more to look at before to reply.

Yes obviously if the US economy turns for the worse they may not continue with the plan. But that is obvious...

As it stand today they will...

[Ticker2000]

Police being shot, rubber bullets being used again, taxi drivers being beaten up, leaders houses being shot at the dead of night, EC urging for delays in election date, Ying... crying again, top brass speaking out for calm ---- all adding to my argument of a perfect storm brewing.... Hope that banks are as we are told well capitalised as when this pops which it might given all they will need all the reserves they have to deal with the defaults from there slap dash credit offerings. The house hold debt here is huge and will not take much to put the system under pressure.

[Ticker2000]

Going by the market rates at the moment the pound will be stronger on open tomorrow. Unless something change overnight I suspect we wlll be breaching 54 quite soon. After that I am not sure. The 55/56 line is huge. However with the way the Perfect Storm become more perfect......

[MJP]

This sort of thing (if you can believe it) won't hurt in the long run either . . .

http://www.bbc.co.uk/news/business-25519110

[chiang mai]

Why do you think there will be a constant reduction in QE over 8 months. No-one has mentioned that and I don't know a single other person who thinks it will happen like that QE in the US could go on for years. It is bound to be increased at times when things start falling apart again, which is more or less a certainty. I wouldn't be surprised to see even bigger QE than we have now sometime over the next few years. This is a very long way from the end.

Do your research - dozens of links out there.

http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1202&MainCatID=12&id=20131226000060

http://www.bloomberg.com/news/2013-12-20/fed-seen-tapering-qe-in-10-billion-steps-in-next-seven-meetings.html

Many more to look at before to reply.

Yes obviously if the US economy turns for the worse they may not continue with the plan. But that is obvious...

As it stand today they will...

Lots of "probably" and "if" in those articles, everything far from certain hence the point made is entirely valid I reckon.

[Ticker2000]

Why do you think there will be a constant reduction in QE over 8 months. No-one has mentioned that and I don't know a single other person who thinks it will happen like that QE in the US could go on for years. It is bound to be increased at times when things start falling apart again, which is more or less a certainty. I wouldn't be surprised to see even bigger QE than we have now sometime over the next few years. This is a very long way from the end.

Do your research - dozens of links out there.

http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1202&MainCatID=12&id=20131226000060

http://www.bloomberg.com/news/2013-12-20/fed-seen-tapering-qe-in-10-billion-steps-in-next-seven-meetings.html

Many more to look at before to reply.

Yes obviously if the US economy turns for the worse they may not continue with the plan. But that is obvious...

As it stand today they will...

Lots of "probably" and "if" in those articles, everything far from certain hence the point made is entirely valid I reckon.

No entirely valid as there are many articles out there if you look indicating that the tapering will continue at a steady pace over the next year should the recovery continue. I was asked to post some and I did........ So as I say not entirely valid.....

[chiang mai]

Should, if, maybe, probably!

Some great quotes in this article which make the point:

http://www.reuters.com/article/2013/12/26/us-markets-global-idUSBRE96S00E20131226

I don't get why we seem to have an eternally upward market, but it looks like that's what we have," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. "There's no reason to sell stocks, but also not much reason to buy except for that fact that we continue to be poised to go higher."

Unemployment is still historically high, however, and some analysts fear this year's blockbuster stock rally -- the benchmark S&P 500 has gained 29 percent so far in 2013 -- could be disrupted by a painful correction in early 2014.

The divergence between the U.S. and Japanese growth outlooks and monetary policies helped the dollar hit a five-year high against the yen, just shy of 105 yen, and nudged 10-year Treasury yields to 2.99 percent after touching 3 percent overnight.

If that trend continues, it could make for rough sailing in other assets, including stocks and commodities.

The 10-year Treasury yield is a benchmark for mortgage rates and investment returns, and higher borrowing costs could slow a recovery that's gathered speed as it heads into 2014.

"Other markets will take notice if we establish a foothold above 3 percent," said Rob Zukowski, senior technical analyst at 4Cast Ltd in New York.

Edited December 26, 2013 by chiang mai

[Naam]

I am a poet and a collector of unicorns and show ponies.

that goes without saying

[AyG]

As western economies rebound, which they will, the money invested in emerging markets will recede.

Absolutely not. As western economies rebound it will be "risk on" meaning increased investment in riskier areas such as emerging markets.

[Naam]

@water clever dicky

nothing more interesting than a personal introduction. but the length you claim seems to be slightly exaggerated.

[chiang mai]

@water clever dicky

I feel sure you're trying to tell us something, that you're a what, dunno!

[Huayrat]

@water clever dicky

I feel sure you're trying to tell us something, that you're a what, dunno!

I think he is telling you that your way off the mark with your GBP predictions but we all know that anyways lol

[chiang mai]

@water clever dicky

I feel sure you're trying to tell us something, that you're a what, dunno!

I think he is telling you that your way off the mark with your GBP predictions but we all know that anyways lol

Perhaps you can provide us with a link showing what those were and when?

[Huayrat]

The way it's going it wil be 55 come Monday night.. It's rising so fast and not stopping..

[chiang mai]

The way it's going it wil be 55 come Monday night.. It's rising so fast and not stopping..

Do you know why?

[Naam]

The way it's going it wil be 55 come Monday night.. It's rising so fast and not stopping..

Monday is a day spelled without an "r". on days without "r" Sterling usually doesn't rise.

[TexasRanger]

Just about to buy a house and was going to transfer some sterling, now I think I should wait and see where this goes. Not much of a financial type, any advice? Just do it now or wait till I see it start to drop? Quite peeved I sent a large chunk over about a month ago:-(

[chiang mai]

A couple of articles in the UK business press this morning talking about how Sterling has become a safe haven currency simply because the EUR and USD have performed so poorly. Europe continues to risk a break up and the new US Fed chairperson, Yellen, is an arch dove hence the UK with it's austerity program is the best of a less than perfect bunch, despite an increasing deficit etc al. http://www.telegraph.co.uk/finance/currency/10539579/Pound-will-be-safe-haven-currency-of-2014-says-Citigroup.html

Citigroup at least seems to think Sterling could continue to remain very strong throughout 2014, if you believe that then it's worth waiting to exchange Pounds for Baht. Where we are currently is just another stage in the game that evolves constantly and chances are that the picture could change radically at any time. Personally I don't see how an increasingly strong Pound is ever going to help a UK recovery and any increase in interest rates will cause serious damage to UK home/mortgage holders - my guess is that the picture could look very very different in six months time when the Thai political problems have settled down and the interest rate picture in the UK has become more clear. It'll be a magnificent trick if the UK can keep all the plates spinning long enough for a real (manufacturing) recovery to take hold, personally I expect it all to go pop at some point.

Edited December 28, 2013 by chiang mai

[SheungWan]

Just about to buy a house and was going to transfer some sterling, now I think I should wait and see where this goes. Not much of a financial type, any advice? Just do it now or wait till I see it start to drop? Quite peeved I sent a large chunk over about a month ago:-(

You would probably have been much more upset if you had agreed to buy and then found the currency rate going as dramaticaly against you. As it is the property is going to cost you less than you had previously planned. Since you will now be averaging out, set yourself a final figure average you will be comfortable with and aim for that. At a more extreme level if you think that the baht is going to hell on a hellcart then there is the option of blowing out your deposit and re-entering the market for a property at a much better exchange level.

Edited December 28, 2013 by SheungWan

[onewhowalkswithbuffalo]

A couple of articles in the UK business press this morning talking about how Sterling has become a safe haven currency simply because the EUR and USD have performed so poorly. Europe continues to risk a break up and the new US Fed chairperson, Yellen, is an arch dove hence the UK with it's austerity program is the best of a less than perfect bunch, despite an increasing deficit etc al. http://www.telegraph.co.uk/finance/currency/10539579/Pound-will-be-safe-haven-currency-of-2014-says-Citigroup.html

Citigroup at least seems to think Sterling could continue to remain very strong throughout 2014, if you believe that then it's worth waiting to exchange Pounds for Baht. Where we are currently is just another stage in the game that evolves constantly and chances are that the picture could change radically at any time. Personally I don't see how an increasingly strong Pound is ever going to help a UK recovery and any increase in interest rates will cause serious damage to UK home/mortgage holders - my guess is that the picture could look very very different in six months time when the Thai political problems have settled down and the interest rate picture in the UK has become more clear. It'll be a magnificent trick if the UK can keep all the plates spinning long enough for a real (manufacturing) recovery to take hold, personally I expect it all to go pop at some point.

God if only we had the kind of car exporting that Germany has. Still our aerospace industry is the second largest in the world.

I think it would be safe to assume the GDP will grow in strength throughout 2014 and we should see at least 60 baht to the pound by Q3. Thailand has far bigger problems than the political situation. As soon as the un-employment rate in the UK hits 7% Carney said he is raising interest rates. On the one hand you could be forcing another housing bubble but on the other hand, hopefully the economical output will be getting better and therefore the general public will have additional funds to cater for the rise in interest rates. I believe over the last 4 years it has been very difficult to get a mortgage and downpayments have been at a minimum of 25% needed. Thus this has hoepfully removed the sector of the public who basically couldn't afford the mortgage they had. Add to this that people have fixed rate mortgages which might go on for some months after the interst rates have risen, I suspect in relation to fears of interest rates being risen, in 2014 there may be a period of grace in which to get your finances together. I believe the crud of the public who could not afford their mortages have been gotten rid of in the recession and I very much doubt they would have been given another mortgage they could not afford in the last 4 years or indeed have even had a job.

Also you have to think about it like this, savvy investers have put their money in gold, property and stocks in the last four years. If the interest rates rise, people will be channelling funds to the banks again. This will in turn create revenue for the government from the proceeds of what the banks do with that influx of money. Someone correct me if I am wrong but the more money the banks have, the happier they are to load that money out which in turn can be used to spurn small businesses and create more export, hopefully manufactoring export because that is something we need to rekindle.

Edited December 28, 2013 by onewhowalkswithbuffalo

[chiang mai]

Carney has said that unemployment of 7% is the threshold, beyond which interest rates could be increased, there is no automatic assumption that rates will be increased then.

Any increase in the bank rate would negatively impact one in six mortgage holders, given that the current recovery is almost solely consumer driven, aka driven by housing sales, raising rates does present a problem.

As far as Q3 is concerned and the value of the Baht then, I don't think it's possible to look that far ahead and predict how things might be in either country at that time, everything could easily have gone 180 degrees in both countries by that time.

Edited December 28, 2013 by chiang mai

[rayongchelsea]

A couple of articles in the UK business press this morning talking about how Sterling has become a safe haven currency simply because the EUR and USD have performed so poorly. Europe continues to risk a break up and the new US Fed chairperson, Yellen, is an arch dove hence the UK with it's austerity program is the best of a less than perfect bunch, despite an increasing deficit etc al. http://www.telegraph.co.uk/finance/currency/10539579/Pound-will-be-safe-haven-currency-of-2014-says-Citigroup.html

Citigroup at least seems to think Sterling could continue to remain very strong throughout 2014, if you believe that then it's worth waiting to exchange Pounds for Baht. Where we are currently is just another stage in the game that evolves constantly and chances are that the picture could change radically at any time. Personally I don't see how an increasingly strong Pound is ever going to help a UK recovery and any increase in interest rates will cause serious damage to UK home/mortgage holders - my guess is that the picture could look very very different in six months time when the Thai political problems have settled down and the interest rate picture in the UK has become more clear. It'll be a magnificent trick if the UK can keep all the plates spinning long enough for a real (manufacturing) recovery to take hold, personally I expect it all to go pop at some point.

God if only we had the kind of car exporting that Germany has. Still our aerospace industry is the second largest in the world.

I think it would be safe to assume the GDP will grow in strength throughout 2014 and we should see at least 60 baht to the pound by Q3. Thailand has far bigger problems than the political situation. As soon as the un-employment rate in the UK hits 7% Carney said he is raising interest rates. On the one hand you could be forcing another housing bubble but on the other hand, hopefully the economical output will be getting better and therefore the general public will have additional funds to cater for the rise in interest rates. I believe over the last 4 years it has been very difficult to get a mortgage and downpayments have been at a minimum of 25% needed. Thus this has hoepfully removed the sector of the public who basically couldn't afford the mortgage they had. Add to this that people have fixed rate mortgages which might go on for some months after the interst rates have risen, I suspect in relation to fears of interest rates being risen, in 2014 there may be a period of grace in which to get your finances together. I believe the crud of the public who could not afford their mortages have been gotten rid of in the recession and I very much doubt they would have been given another mortgage they could not afford in the last 4 years or indeed have even had a job.

Also you have to think about it like this, savvy investers have put their money in gold, property and stocks in the last four years. If the interest rates rise, people will be channelling funds to the banks again. This will in turn create revenue for the government from the proceeds of what the banks do with that influx of money. Someone correct me if I am wrong but the more money the banks have, the happier they are to load that money out which in turn can be used to spurn small businesses and create more export, hopefully manufactoring export because that is something we need to rekindle.

So we should invest in bank shares?