Weak euro boosts Bordeaux’s prospects

Aside from the vagaries of the vintage, currency may play a decisive role in the upcoming en primeur campaign as Liv-ex report.

Liv-ex have been looking at exchange rates as one reason why the fine wine market is showing distinct signs of life after an unprecedented four years of decline. “Confidence in the market appears to be returning with the Liv-ex 100 increasing for 6 months in a row since its low in July,” said Liv-ex MD and co-founder, James Miles. “In January the index was up 1.8% on record volumes for the exchange. The weakness of the Euro and a busy market ahead of the Chinese New Year have certainly been contributing factors, together with a sense that there is some value in the fine wine market at these levels.”

Liv-ex reported that: “Although the index is calculated in Sterling, the recovery is perhaps better understood when viewed in Euros and Dollars. While prices have risen in Sterling, they look cheaper still in Dollars, bringing American and Asian buyers back into the market.” The dollar has strengthened to €1.135, from the time of the last en primeur in May when it was trading at €1.35. “So the Euro’s down 17% on the world’s biggest currency,” said Liv-ex director Justin Gibbs. “That’s a great positive for the fine wine market and buyers are more likely to get involved.”

The equivalent gain for Stirling is around 10% which should stimulate interest in the UK – still one of the principle buyers of en primeur, and undoubtedly the biggest when it comes to private collectors, according to Gibbs. Of course the big question remains whether Bordeaux will simply rely on the exchange rate to correct a market that has barely functioned in recent primeur campaigns. “That’s exactly what they have been hinting at,” said Gibbs. “The Châteaux will be inclined to let the Central bankers do the work for them.”

All things being equal will a 17% drop in the dollar price, or 10% in Stirling, be sufficient to renew the market’s faith in Bordeaux in May. “For some Châteaux it will be enough, for others perhaps not,” said Gibbs, who urges the owners to look beyond 2013 to what is actually available in physical vintages.