The actual rate at any one time is determined by supply and demand conditions for the relevant currencies in the market. Take an example. Oil is priced internationally, with prices set in dollars.
Competitive forces ensure the UK price of oil is the same as the global price.
Haircuts, on the other hand, cannot be imported and are priced locally. The price of haircuts remains constant in pound terms, so the relative price of haircuts has fallen. Hairdressing will now be relatively less profitable compared to oil production. The signal sent by the exchange rate eases adjustments in the economy between the domestic and international sectors. For instance, a shock might include a big rise in domestic savings, without a rise in domestic investment.