By FWi staff
STERLING today entered the last of five 10-day confirmation periods that could result in the revaluation of the Green Pound on May 3.
The recent weakening of Sterling to DM3.00 against the Deutschmark means the Green Pound is now hovering on the edge of revaluation territory. But recent volatility on the currency markets means that predicting any revaluation is difficult.
The Real Monetary Gap (RMG) – the difference between the market value of Sterling and the Green Rate – is now only just above the crucial 5% threshold which triggers a revaluation.
If Sterling maintains its current value until May 3, farm subsidies and intervention payments would be reduced by 2.7%. Intervention payments would fall by just under £7/ha and cereal intervention prices would fall by £2.45/ tonne.
But if Sterling weakens further so the average RMG falls below 5% over the 10-day period, then a revaluation of the Green Pound will be avoided.