The general election and the Greek deficit could make the exchange rate with sterling volatile, says Mark Deans

On a single rack in the wine section there are products from 20 or more countries. Twelve years ago that would have meant a budgetary exposure to the movement of 20 currencies against the pound.

Since the introduction of the euro that number has fallen by a third. Chateau Musar remains inextricably linked to the Lebanese pound and Fendant still leaves the winery with a Swiss franc price tag, but the euro area now accounts for more than half the world's production.

Whatever the new chancellor might do with duty in the 'real' budget, it will leave importers and retailers exposed to the sterling/euro exchange rate.

The lesson of the past couple of years is that to be an importer of euro-denominated produce is not an ideal situation. Nevertheless, it is one that must be dealt with even though the general election is getting in the way.

Since the beginning of the year, the pound has wobbled along in a range of roughly three cents either side of 1.1250. It is reassuring that the market has found a comfort zone and is no longer giving the pound both barrels at every opportunity. But what happens next?

The general election will be critical. It matters less which of the two main parties wins than that one of them ends up with a workable majority. Every opinion poll pointing to a hung parliament sends a shudder through sterling's spine.

The risks for the euro are also political, but in a different way. The recent agreement in Brussels to cobble together a safety net for Greece has taken a lot of the pressure off the euro but investors are not totally convinced.

There remains a suspicion that Chancellor Merkel, with the right of veto on any execution of the plan, might still refuse to permit the pulling of the trigger. Despite a successful bond issue by Greece in late March there might still be more to hear of this story.

A benign UK election and final resolution of the Greek tragedy could allow sterling to saunter along for another three months between 1.0950 and 1.1550. If that would suit you, hedge half your currency exposure; if not, do 50%.

Mark Deans is dealing manager at Moneycorp