The Bank of England say they are treating the mysterious and sudden crash of the pound as “suspicious”, and have launched an official investigation.
The pound nosedived more than 6 per cent within 2-minutes after overnight trading in Asia on Friday.
“We are looking at the causes of the sharp falls over night,” the Bank of England confirmed in a statement.
The pound fell as much as 6 per cent to $1.1841 – the most aggressive move since the results of the Brexit vote emerged in June – before recovering to $1.24 against the dollar.
The flash crash aftershocks also briefly pushed sterling below €1.10, for the first time since early 2010.
Sterling’s volatility also overshadowed the latest data on the US labour market, which usually grabs the attention of the currency market.
The pound regained some of its lossess but was still down 2 per cent at $1.2363 ahead of the US markets opening on Friday.
Putting Friday’s morning’s “flash crash” aside, the pound has still fallen about 18 per cent against the dollar to below $1.24 since Britain voted to leave the European Union on 23 June.
The sudden plunge left investors wondering what drove the flash crash.
“It was just another quiet day in Asia, and then, Bang! All the lights went red,” Matt Simpson, senior market analyst at ThinkMarkets, told CNN.
There was speculation a technical glitch or human error had sparked a rash of computer-driven orders.
Naeem Aslam, chief market analyst of Think Markets, said the fall was an indicator of how low the currency could still go.
“What we had was insane – call it flash crash but the move of this magnitude really tells you how low the currency can really go,” said Naeem Aslam, chief market analyst of Think Markets, in a note, according to Bloomberg.
“Hard Brexit has haunted the sterling,” he added.
One of the theories surrounding the mysterious flash crash include the publication of a report by The Financial Times.
In the report, French president François Hollande said Britain must suffer the consequences of leaving the EU and the EU must demand a tough stance when it negotiates an exit.
Su-Lin Ong, a senior economist at RBC Capital Markets, said: “The move coincided with an FT story about French president Hollande demanding tough Brexit negotiations. The move was exacerbated once stops were tripped below a key level of $1.2600 in very thin trading before the US payrolls.”
The pound has been very sensitive to politics lately as fears over the consequences of a so-called “hard Brexit” haunt investor attraction towards the currency.
Latest posts by Sean Adl-Tabatabai (see all)
- President Trump: Nancy Pelosi HATES the United States of America - October 13, 2019
- Rose McGowan Slams Hillary Clinton For Protecting Serial Rapist Harvey Weinstein - October 13, 2019
- California Gov. Newsom Signs Bill Forcing Universities to Dish out Abortion Drugs - October 13, 2019