A UK outdoor clothing producer sets the price of its coats in pounds for customers in the euro area. It buys fasteners from the euro area at a price fixed in euros. The pound depreciates against the euro. Which statement gives the best assessment of the effect on the producer?
Both the price paid by euro-area buyers and the pound cost of fasteners fall, improving sales and costs.
Coats become dearer to euro-area buyers, while fasteners cost fewer pounds, creating opposing effects.
Coats become cheaper to euro-area buyers, but fasteners cost more in pounds, so the overall effect depends on the size of each change.
Both the price paid by euro-area buyers and the pound cost of fasteners rise, putting pressure on sales and costs.