When the pound falls, each pound buys fewer euros
An exchange rate is the price of one currency in terms of another. Suppose one pound buys €1.20, and then heavy selling of pounds on the foreign exchange market pushes the rate down to €1.00. The pound now trades for less of the other currency. The euro has strengthened by the same move, because one currency cannot weaken against another without the other gaining.
BeforeAt €1.20 to the pound, the pounds offered for sale, S0, match the pounds wanted, D.
The importer needs more pounds for the same goods
A British importer buys kettles from a German maker at €30 each. At €1.20 to the pound each kettle cost £25; at €1.00 it costs £30. Nothing about the kettle has changed. The foreign currency has become more expensive, so the foreign good has become more expensive to anyone paying in pounds. Firms that have hedged, paying a fee to lock in an exchange rate in advance, feel this only when the contract runs out.