If £1 is £1 how does the value of it change? It’s still 100p so shouldn’t there be a set conversion rate? I don’t understand how the VALUE of it changes.
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1 pound buys 400gm of butter today. Tomorrow, 1 pound buys 300gm of butter. The value has changed.
When we say something costs some amount of money. This is an exchange rate between money and that thing. Prices change all the time so the value of the currency changes all the time. This is what most people encounter daily.
Some companies and people, import and export goods to other countries. So they are concerned with how much a certain currency costs in terms of another currency. This is the currency exchange rate (basically how much of one in EXCHANGE for another). This exchange rate changes depending on whether that particular currency is in demand or not. This would be a bit beyond ELI5.
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