The city is in shock this morning, as Sterling crashed by more than 6% in Asian trading, taking it to a new 31 year low, and the biggest move since Brexit. With speculation circling trading floors around the world as to what exactly caused the movement, algorithms, fat fingers, and mounting fears over a ‘hard’ Brexit have all been quoted as possible explanations behind the major move, however these are all assumptions. Whilst the turbulent Asian session saw Sterling fall dramatically, it has since recovered to now only down 1.5%.

Sterling has been under significant pressure since Brexit, and was further hampered last Sunday when Theresa May said she would trigger Article 50 by the end of March 2017. This latest fall overnight however, seems to be a fresh low for the pound, which is in significant danger of a further collapse.

All eyes will now turn towards Mark Carney and his troops later this month, where the possibility of another interest rate cut or implementation of more stimulus could be on the cards to help boost a dwindling UK economy.

Article by Callum McGrouther, Corporate Dealer

Pound falls sharply in mysterious ‘flash crash’ during Asian trading

Sterling suffered a rapid decline that has been referred to as a ‘flash crash’ in the early hours of trading today. A few minutes of chaos during Asian trading sparked a plunge in Sterling to a 31-year low. Despite recovering some of the losses this morning, the dramatic fall demonstrates the current lack of appetite for the pound as well as the high levels of volatility in currency markets.

With this latest 6% decline, the pound, which has dropped 16% since the referendum, is now 2016’s worst performer among 31 major currencies tracked by Bloomberg.

Mystery still surrounds the exact reason for the sudden sell off with some traders believing that it could be down to a ‘fat finger’ error from a trader or a computerised chain reaction triggered by trading algorithms. Others believe that an article in the FT in which French President, François Hollande was quoted saying that the UK would have to “suffer” for the Brexit vote in order to ensure EU unity, was the real cause.

With markets now anticipating a ’hard’ Brexit for the UK the question remains; how far will Sterling recover from these latest falls, or are there further shocks for the currency still to come?
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* Information courtesy of Currencies Direct
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