Currency Movements

Over recent weeks the Pound has weakened significantly against the Euro.  As the chart shows, Sterling strengthened through the middle of 2012 going beyond €1 = 78p (£1 = €1.28) at one point.  This was at the height of the ‘Eurozone Crisis’ and the UK currency was seen as a safe haven, thus boosting its value.

Although the problems of the Eurozone are by no means solved, things have gone rather quiet on this front, and there is even some better news coming out of the economies of Europe.  At the same time, the outlook for the UK does not seem particularly rosy.  With borrowing still at very high levels the success of ‘austerity’ is being called into question and even the UK’s triple A grade bond rating is being questioned. 

Whether this is just a short-term market reaction to immediate events, or a longer-term shift is impossible to say.  The market consensus in December was that the exchange rate would remain around €1 = 80p through 2013.  The current weakness may be tempting in terms of hedging a portion of the 2013 Single Payment.   

More generally, a weaker Pound is good news for farming – helping our competitiveness on European markets where the majority of our farm exports go.