The pound had dropped by 10% to $1.15 in Asian trading on Friday morning, its lowest level since March 1985.
Photograph: Toru Yamanaka/AFP/Getty Images
The Bank of England and other central banks are scrutinising the dramatic dive in the pound on Friday to establish what drove sterling to new 31-year low in a trading incident that has had repercussions across global markets.
The trading incident appears to have lasted for about four minutes in early Asian trading, compounding the losses that sterling had already suffered following speculation that Britain is heading for a “hard Brexit”.
The Bank, which had been on alert for the impact of computer trading on markets, said: “We are looking at the causes of the sharp falls overnight.”
Governor Mark Carney has asked the Bank for International Settlements - which represents the world’s central banks – to review the events which took pace in the early hours of Friday morning. “With input from the Bank, the [BIS markets] committee will review the lessons from this, and other recent episodes of flash events in foreign exchange markets at its next meeting,” the Bank said.
At one point the pound dropped 10% from $1.26 to $1.15, its lowest level since March 1985, in a matter of minutes as Asia opened for business. . It regained some of its losses and was down 1.4% at $1.2440 as London closed for the weekend.
While traders continued their postmortems, a strategist at HSBC, David Bloom, said: “The currency is now the de facto official opposition to the government’s policies.
“To us, the foreign exchange market is exhibiting an uncanny resemblance to the five stages of grief. First, following the Brexit vote came the denial – theories circulated whether a second referendum would have to take place. Second was anger – claims the vote was unfair. Third was the bargaining – arguments maybe it wouldn’t be that bad, what if the UK followed the Norwegian or Switzerland model. Now, the fourth – a gloom is prevailing over the pound.
It’s become an uncomfortable reality to the market, post the Conservative conference, that the UK will embark on a ‘hard Brexit’.”
Bloom said he expects the pound to be at $1.10 by the end of 2017.
Source: https://www.theguardian.com/business/2016/oct/07/confusion-as-pound-falls-10-in-insane-asian-trading-and-no-one-knows-why
The Bank of England and other central banks are scrutinising the dramatic dive in the pound on Friday to establish what drove sterling to new 31-year low in a trading incident that has had repercussions across global markets.
The trading incident appears to have lasted for about four minutes in early Asian trading, compounding the losses that sterling had already suffered following speculation that Britain is heading for a “hard Brexit”.
The Bank, which had been on alert for the impact of computer trading on markets, said: “We are looking at the causes of the sharp falls overnight.”
Governor Mark Carney has asked the Bank for International Settlements - which represents the world’s central banks – to review the events which took pace in the early hours of Friday morning. “With input from the Bank, the [BIS markets] committee will review the lessons from this, and other recent episodes of flash events in foreign exchange markets at its next meeting,” the Bank said.
At one point the pound dropped 10% from $1.26 to $1.15, its lowest level since March 1985, in a matter of minutes as Asia opened for business. . It regained some of its losses and was down 1.4% at $1.2440 as London closed for the weekend.
While traders continued their postmortems, a strategist at HSBC, David Bloom, said: “The currency is now the de facto official opposition to the government’s policies.
“To us, the foreign exchange market is exhibiting an uncanny resemblance to the five stages of grief. First, following the Brexit vote came the denial – theories circulated whether a second referendum would have to take place. Second was anger – claims the vote was unfair. Third was the bargaining – arguments maybe it wouldn’t be that bad, what if the UK followed the Norwegian or Switzerland model. Now, the fourth – a gloom is prevailing over the pound.
It’s become an uncomfortable reality to the market, post the Conservative conference, that the UK will embark on a ‘hard Brexit’.”
Bloom said he expects the pound to be at $1.10 by the end of 2017.
Source: https://www.theguardian.com/business/2016/oct/07/confusion-as-pound-falls-10-in-insane-asian-trading-and-no-one-knows-why