Pound Weakens January 22, 2016 12:00 am Since the turn of the year the Pound has been weakening on currency markets. The relationship between the Pound and the Euro (and to a lesser extent the Dollar) is one of the key drivers of farm profits. The relative strength of Sterling over the last couple of years has been one of the factors bearing down on prices across all sectors of UK farming. As the chart below shows, the Pound was as strong as £1 = €1.43 as recently as November (€1 = 70p). Since then it has weakened by almost 10% to £1 = €1.30 (€1 = 77p). Sterling has also lost ground against the Dollar. Were this situation to continue, it should provide a boost to UK farmgate prices. The main reasons given by economist for the sudden shift are; before Christmas the talk around the UK economy was all positive. Over the last few weeks even the Chancellor has stated that 2016 could be a tough year. The economic performance of the Uk versus other economies (especially the Eurozone) suddenly doesn’t look so promising and currency markets have reacted linked with the previous point is the delay in likely Base Rate increases in the UK due to economic uncertainty. With domestic rises pushed to late in teh year, or 2017, and with the US starting to raise interest rates, holding Sterling looks less attractive the uncertainty over the referendum on EU membership and possible ‘Brexit’ is also casting a shadow over the Pound.
