UK pound is now a vaccine currency and surges against the baht

The pound is now a vaccine currency, at any rate for now.

The British pound has surged past the 42 baht level in interbank rates in a surprising turnaround which has surprised most expats and local users. Prior to Brexit actually happening, currency holders had been warned that the pound could drop as low as 35 baht if there was no deal with the European Union or if the agreement was limited. Some pessimists even predicted parity with the US dollar. But Brexit anxieties seem to be expired in the currency markets.

The reason for the ongoing strength of the pound appears to be related to the coronavirus pandemic. The rate of contagion in UK continues to decline but crucially – according to currency commentators Goldman Sachs and Bloomberg – the UK has the fastest vaccination rollout per capita of any large country in the world. Roughly a quarter of its population already has received at least one jab, far higher than its industrial competitors. Some dealers expect the pound to proceed to the 43-44 level to the baht before falling back.

Other factors in sterling’s favour at the moment are the Bank of England’s decision not to impose negative interest rates, for now, and a residual sigh of relief in currency markets that the UK’s admittedly shaky departure from the European Union has been less disruptive than feared. Meanwhile, the US dollar is suffering from an unexpected increase in America’s weekly jobless figures, whilst the economy is proving slow to recover after a winter of Covid-19 surges in many states. Sterling is now testing the 1.400 level with the US currency.

The baht, the US dollar and the euro are all in retreat against the pound.

But currency traders say that the pound’s advance could be halted if the UK’s economy proves slower than anticipated in coming months. British Prime Minister Boris Johnson is currently announcing his plans to end lockdown, but the results in plain sight have yet to be witnessed. Moreover, any backsliding in the UK’s campaign to immunize the whole population more quickly than in continental Europe would sicken the British currency.

The pound’s improvement against the baht has little to do with the Thai economy. Thailand still has a healthy trade surplus and a current account surplus, although she has been hit by the almost total absence of mass tourism for the past year. If the country chooses to allow mass tourism back towards the end of 2021, for example by withdrawing quarantine restrictions for vaccinated individuals, the baht would likely rebound. But, for the time being, the pound is sitting pretty.