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Sterling loses ground

Sterling lost ground when credit rating agency, Moody's, gave UK's AAA rating a negative outlook due to its exposure to the Euro zone debt crisis.

Currency rates - February 15

EURO/GBP - 1.1936

US$/GBP - 1.5721

CHF/GBP - 1.4414

CAN$/GBP - 1.5648

AUS$/GBP - 1.4636

ZAR/GBP - 12.0868

JPY/GBP - 123.36

HKD/GBP - 12.1874

NZD/GBP - 1.8762

SEK/GBP - 10.4795

AED/GBP - 5.7712

US$/EURO - 1.3160

INR/GBP - 77.45

It means there is a one in three chance of a downgrade in the next 12-18 months. UK Consumer Price Index (CPI) data was released as expected showing a fall to a 14 month low. The Governor of the Bank of England explained the decision to inject an additional 50 billion pounds into the UK's economy was based on the Bank of England's view that there was a "downside" risk of inflation slowing too far past the 2% target. He also stated that CPI inflation will continue to fall back to around the target by the end of 2012.

In Europe, Moody's cut the debt ratings of six European countries including Italy, Spain and Portugal whilst placing France and Austria on a negative outlook; however, the European Financial Stability Facility's (EFSF) kept its AAA rating. German investor confidence (which aims to predict economic developments six months in advance) was much better than expected rising to a 10-month high and Italy's borrowing costs fell. The German Finance Minister said that Europe is now better prepared for a Greek default than it was two years ago. The Chairman of the Euro group announced that the scheduled meeting today for Euro-area finance chiefs has been postponed until next Monday. Once more, another deadline has not been met; however, the default day deadline of March 20 cannot be postponed. On a slightly more positive note, China has again stated that they are preparing for further involvement in helping Europe.

In the US, data released showed that retail sales rose at a rate below estimates with an unexpected drop in the purchases of automobiles driving the figures lower. As well as data showing the balance of domestic and foreign investment released today, the Federal Open Market Committee (FOMC) releases its minutes in the evening providing an insight into the economic and financial conditions that influenced their vote on where to set interest rates.

Elsewhere, the Bank of Japan's stimulus expansion was the most notable news adding 10 trillion yen to its asset purchase program increasing its total to 30 trillion yen (£245 Billion). The Bank of Japan also kept its base interest rate unchanged, target 1% inflation and kept the credit lending program at 35 trillion yen.

Supplied by Nick Ryder of Smart Currency Exchange, the currency partner to Harpers Wine and Spirit who have teamed up with Smart to provide readers with a free bespoke currency service. Go to www.smartcurrencybusiness.com/winespirit for more information or call on 0207 898 0500.