Flash crash sees the pound gyrate in Asian trading


The thumping has dived on Asian markets with automated trading being blamed for the volatility.

At one the theatre it fell as much as 6% to $1.1841 – the biggest move since the Brexit desire support – before recovering. It was recently trading 2% lower at $1.2388.

It is not clear what triggered the unforeseen sell-off. Analysts say it could have been automated trading tterns reacting to a news report.

The Bank of England said it was “looking into” the glimmer crash.

The sharp drop came after the Financial Times broadcasted a story online about French President Francois Hollande difficult “tough Brexit negotiations”.

“It’s difficult to know exactly what triggered it,” Angus Nicholson, furnish analyst with IG in Melbourne, told the BBC.

The pound has been volatile since the UK voted to check out the European Union.

Analysts speculate that a computer may have been set to leaf through the news for negative Brexit stories, with the order to sell if it originate any.

The trigger could have also been a simple mistake, or what’s cognizant of as a fat finger trade, when a trader enters a wrong number. Analysts at JP Morgan who include analysed the flash crash think that was unlikely to be the trigger.

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‘Selling pressure’

The incident happened at a time when there is totally little pound trading going on – which means that any sell-off ss on have a bigger im ct than during busy hours.

The kettle of fish is likely to have been exacerbated by trading algorithms (sometimes recognize as algos) – software which is designed to trade automatically and can react much faster than humanitarian traders.

“These days some algos trade on the back of word sites, and even what is trending on social media sites such as Chirping, so a deluge of negative Brexit headlines could have led to an algo delightful that as a major sell signal for the pound,” says Kathleen Brooks, analyse director at City Index.

“Once the pound started moving cut then more technical algos could have followed gratify, compounding the short, sharp, selling pressure.”

Ms Brooks thinks another dazzle crash could be on the cards for the pound.

“This highlights the drawback of rings making trading decisions, however, it is the reality, and it is only getting diverse popular. Thus, another flash crash is possible,” she said.

Wholesalers remain nervous about the fallout from the UK’s talks with the EU beyond leaving the bloc.

Last Sunday, the Prime Minister Theresa May reported she would trigger Article 50, the clause needed to start the outlet process, by the end of March 2017.

Sterling has been “on a precipice” since then, according to Sean Unfledged, senior currency strategist at Australian bank, West c.

“I think we’ve undervalued how many people had money positions for a very wishy-washy Brexit, or disinterested none,” he said.

‘Lose-lose situation’

Analysts at HSBC are forecasting that the cleanse could fall to $1.10 and could be worth just one euro by the end of next year.

“The Donnybrook which is still presented to us – that the UK and EU will resolve their idiosyncrasy and come to an amicable deal – appears a little surreal,” said David Bloom, fully of foreign exchange research at HSBC.

“It is becoming clear that sundry European countries will come to the negotiation table looking for national damage limitation rather than economic damage limitation. A lose-lose state of affairs is the inevitable outcome.”

Ms Brooks, from City Index said: “The big conclusion for the pound right now is that it has become detached from the economic essentials and politics have become king. This is where things leave get dangerous for the currency going forward.

“Theresa May’s hard-line on Brexit bargainings and her insistence that negotiations will take place in private set up only increased uncertainty for the market, with traders left combing hot item websites for the latest headlines to try and gauge for themselves the state of play between the UK and the EU.”

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