Pound Hits New Record Low Vs Euro, Helps Agri Exports

The pound set a new record low against the euro Wednesday falling below EUR1.14 for the first time since the single currency's inception in 1999, before recovering slightly.

Interest rates have been cut both in the UK and in the eurozone, but they remain higher in the 15-member euro currency area.

The pound was also hit by new data suggesting the UK economy had shrunk by 1% in the three months to November.

Sterling hit a fresh all-time low of EUR1.1384 Wednesday*, and worse may lie ahead according to analysts. In some cases it's already trading 1:1 or less.

Any last-minute-Johnny's buying euros at the airport may be in for a shock. At Luton airport yesterday one foreign exchange desk was only offering a tourist rate of just 1.04, knock off a £4.50 transaction charge and a hundred quid got you 99 euros!

Still, it's not quite all doom and gloom, with freight rates also so cheap at the moment the pound's demise may help us dispose of some of our wheat surplus. One report on Reuters suggests that we may soon be able to export wheat to Brittany at cheaper money than French consumers there can buy at on their domestic market.

In the dairy sector, the drop in sterling has had a "dramatic effect" on the value of intervention, with butter rising from about £1750/t a month ago to £1900/t this week.

The meat sector has also benefited from currency weakness. AHDB Meat Services says that the value of beef exports over the first nine months of the year was up 55% to almost £150m.

* it's dropped even lower overnight, setting a fresh all-time low of 1.1361 Thursday.