Exchange rates having more of a price impact

Published 27 October 16

Over the past year, the relationship between Sterling and the Euro has been providing some positive support to wholesale prices. The chart below plots the cumulative impact of sterling on AMPE since April 2015. This assumes UK wholesale prices are fully impacted by movements in the exchange rate to the Euro.

Even before the UK’s Brexit vote, exchange rates were offering some support to AMPE from the start of 2016, although this wasn’t enough to offset the global deterioration in prices. This support was improved in July, following the Brexit vote, when Sterling weakened by 6% on average, between June and July. This continued support has helped to improve prices. However, other market factors continue to dominate price trends, with exchange rates over the past year ultimately taking the edge off price falls and adding a bit to increases. Since April 2016, AMPE has increased circa 13ppl, with exchange rates accounting for just over 3ppl and other factors under 10ppl.

Exchange rates 27.10.16