- The GBP Pound Sterling and Euro have collapsed against the US Dollar in 2022. The GBP is at its lowest level since 1985, and the Euro is weaker than at any time since 2002.
- US Dollar pegged currencies like the Hong Kong Dollar and Emirati Dirham have become dramatically stronger. The Singapore Dollar is also at it strongest for almost 20 years.
- Fine wine prices are mainly priced in Euro and GBP. This creates a ‘once in a generation’ opportunity for US Dollar linked buyers to acquire fine wine and spirits at bargain prices.
- The implications for European collectors are positive also. Global demand from ‘hard currency’ buyers is driving up prices in GBP and Euro, providing an effective hedge against their declining purchasing power.
- Cru will continue to employ dynamic pricing to ensure that all our prices reflect the reality of local currency moves.
GBP Weakest Since 1985
The last time the GBP was this low Ronald Reagan was president of the United States and Chaka Khan topped the music charts (1985). The Euro has also sunk to its weakest level versus the US Dollar since 2002. The collapse of its two main pricing currencies has huge implications for the fine wine market.
The Decline of GBP & Euro Accelerated in 2022
The long-term downtrend in GBP and Euro versus the US Dollar accelerated in 2022, with GBP down -15.9% and Euro down -12.3% this year alone.
These moves are making it cheaper and cheaper for buyers using US Dollar pegged currencies (or those like the SG$ which tend to move with the US$) to acquire fine wine and spirits. This heralds a big shift in relative purchasing power and is hastening the outflow of inventory from Europe to the east (to the Middle East and Asia) and to the west (to the United States). For European collectors, it means continued upward pressure on prices in their local currency terms.
Buying Power of Dollar-Linked Currencies Skyrockets
Unlike oil, gold, silver, most commodities or bitcoin, fine wine prices are primarily set in Euros and GBP. This is because the majority of fine wine is produced in Europe, and the centre for fine wine trading remains (for now) in London.
But decline in GBP and Euro against currencies like the US Dollar, Singapore Dollar, Hong Kong Dollar and Emirati Dirham is hastening the ‘de-Europeanization’ of fine wine and spirts.
This is illustrated by the cost of our Cru Recommended Portfolio (the “Fab 40”). On the 1 January 2022 the portfolio cost approx. GBP 200,000 (see below). Today (22nd Sept. 2022) that same portfolio costs GBP 232,758, an impressive sounding rise of +16.4%.
But for a buyer paying in Hong Kong or Singapore Dollars, the same portfolio has barely risen this year (see below). In our view this will lead to continued upwards pressure on prices in GBP and Euro as buyers using appreciating currencies exercise their pricing power.
Conclusion: Currency Moves have Implications for Everyone
Wherever you are, these huge currency moves have serious implications.
For US Dollar pegged / linked currency investors, the price of fine wine is falling. This is creating a ‘once in a generation’ opportunity for buyers in the United States, Middle East and much of Asia (ex. Japan and China) to acquire inventory at bargain prices.
But for collectors in Europe, it matters too. The recent price action shows that fine wine can be an effective hedge against currency weakness. As the GBP and Euro sink, fine wine and spirits prices are driven upwards by global ‘hard currency’ demand.
So, there are reasons for everyone (cautiously) to welcome the long-term declines in GBP and Euro against the Greenback.
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