Pain for Exporters: Sterling stuck near 14-month low despite strong retail data

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Sterling languished near 14-month lows on Thursday, and strong British retail sales did little to support the currency hamstrung by fears about Britain leaving the European Union.

Hot weather and the World Cup boosted retail sales in July but the pound remained flat against the dollar around the $1.27 level.

A strong dollar and mounting fears that Britain will fail to secure an agreement before it leaves the EU in March have hurt the pound.

It has shed 12pc of its value since April and on Tuesday sank to $1.2662, its weakest since June 2017, falling against the dollar for a 12th straight day.

Few saw a Bank of England interest rate hike earlier this month as a vote of confidence in the economy, since Britain’s future, and access to European markets, remains in doubt.

“Future interest rate rises now seem a distant prospect and Brexit continues to cause uncertainty… even this good economic performance is unlikely to translate into a lasting boost for sterling,” said Lee McDarby, an executive at currency brokers Moneycorp.

Pain for Irish Exporters

The weak pound may present good value for tourists heading from Ireland to the UK this summer, but it is troubling for our domestic tourism industry, and it presents a major risk to Irish exporters.

Bord Bia overseas trade manager Shane Hamill said the depreciation of sterling means it’s more important Irish exporters find ways to hedge against Brexit.

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“In 2017, 80pc of respondents to Bord Bia’s Brexit Barometer reported that they would face severe difficulties at an exchange rate of 90-94p to the euro,” he said.

“In 2018 this has reduced to 55pc. While the value of sterling remains a risk to growth, exporters to some extent are managing volatility through hedging and recovering cost increases from the market through managing costs and prices.”

Gerard Reilly, of Reilly Mushrooms, in Walderstown, Co Westmeath, warned that 15 companies had closed down since the Brexit vote two years ago.

“The exchange rate is currently around 89c/90c against the euro. That’s putting pressure on exporters,” he said.

“There were around 700 growers in Ireland in 2004 but now there’s only around 40.”

Mr Reilly added that since he exported 90pc of his product to the UK, a hard Brexit would be detrimental to his business.

“We are continuing to trade and grow the same amount, but we are growing in a more nervous environment.”

Meanwhile, Trevor McHugh, managing director of forestry company Veon Ltd, said while fluctuating currency rates had the ability to affect Irish exporters’ competitiveness, the exchange rate tended to settle after an extreme.

“The currency has moved up and down over the last two years. We have seen extremes, but it does tend to settle. Timber prices remain strong and there is a demand in the UK for Irish products as they can’t produce the timber they need,” he said.


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