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Bank of England is Investigating the Pound’s ‘Flash Crash’

Bank of England is Investigating the Pound’s ‘Flash Crash’

The Bank of England is investigating the potential causes of the sudden plunge in the value of the sterling on Friday morning, when the pound reached its lowest level since 1985. The incident happened shortly after Asian trading opened for business and lasted for only a few minutes. Being previously $1.26, it dropped down 10 per cent to $1.15 and shortly after regained some of its losses and was down 1.4 per cent at $1.2440. Among the suspected causes for the sudden ‘flash crash’, are a technical glitch or human error which caused a flurry of computer-driven orders. Some suggest that dealers, or computer trading systems, were reacting to a Financial Times article reflecting the French president, François Hollande’s speech in response to Theresa May’s disclosure that the Brexit deal could restrict UK access to the European single market. He explained that the UK has to “suffer” for the Brexit vote in order to ensure EU unity.

David Bloom, a strategist at HSBC, recognised the gloomy reality, in that the UK will embark on a hard Brexit, which would eventually lead to another fall in the pound at $1.10 by the end of 2017. Another claim was made by the Conservative MP Mark Garnier, a minister at the Department for International Trade, who said, “Clearly it’s [the falling pound] to do with the [Brexit] vote, but actually it’s not an unwelcome reaction….We’ve probably found stability at this level. What we don’t want is to see it jumping around 5 per cent on a weekly basis – nobody wants their currency to be volatile.

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