Flash Crash of the Pound# Stock
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Flash Crash of the Pound Baffles Traders With Algorithms Being Blamed
by Hiroko Komiya
October 6, 2016 — 6:27 PM CDT
Updated on October 6, 2016 — 7:33 PM CDT
British one pound coins stand stacked near the printed face of Queen
Elizabeth II on a five pound banknote in this arranged photograph taken in
London, U.K., on Thursday, Jan. 2, 2014. The pound was the strongest
performer among a gauge of 10 developed-nation currencies in the second half
of 2013 as improved economic data boosted bets the Bank of England will
tighten monetary policy. Photographer: Chris Ratcliffe/Bloomberg
Pound in Freefall Hurts U.K. Bonds as Goldman Sees More Losses little line
above headline
HONG KONG - JULY 05: Competitors paddle their boats during the Tug of War
Fun Race at the Hong Kong Dragon Boat Carnival Race on July 5, 2015 in Hong
Kong, Hong Kong. The Hong Kong Dragon Boat Carnival will be staged from 3
July 2015 (Friday) to 5 July 2015 (Sunday). The carnival featured two key
programmes: the CCB (Asia) Hong Kong International Dragon Boat Races in
Victoria Harbour and the San Miguel BeerFest at the UC Centenary Garden in
East Tsim Sha Tsui. (Photo by Anthony Kwan/Getty Images for Hong Kong Images
)
Singapore Is Crushing Hong Kong in the Race to Cut Home Prices little line
above headline
Theresa May, U.K. prime minister, waits to greet Nicos Anastasiades, Cyprus'
s president, outside number 10 Downing Street in London, U.K, on Tuesday,
Sept. 27, 2016. May needs to trigger the start of negotiations on the
country's exit from the European Union before the end of March, the EUs
economics commissioner said in the strongest indication yet of what the bloc
considers acceptable timing. Photographer: Simon Dawson/Bloomberg
The pound plunged as much as 6.1 percent against the dollar, the biggest
decline since the day the U.K.’s Brexit referendum result was announced, in
a move that traders struggled to immediately explain.
Sterling sank as low as $1.1841, according to data compiled by Bloomberg,
the lowest since March 1985. The pound quickly pared the drop, trading 1.1
percent weaker at $1.2472 at 9:26 a.m. in Tokyo. Traders questioned whether
computer-driven orders had triggered the plunge, exacerbated by a lack of
liquidity in early Asian hours, while some saw the possibility of human
error, or a so-called “fat finger.” Others pointed to a Financial Times
article citing French President Francois Hollande as saying the U.K. must
suffer the consequences of leaving the European Union.
“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," Naeem Aslam,
chief market analyst of Think Markets wrote in a note. “Hard Brexit has
haunted the sterling."
The pound dropped as much as 6.5 percent versus the euro and was down 1.1
percent at 89.37 pence per euro. The FT reported that Hollande, speaking in
Paris at a dinner attended by EU officials, urged the bloc to lead tough
negotiations with Britain to avoid contagion and protect the fundamental
principles of the single market.
“It looks like it was a algorithm-driven flash crash triggered by a
Financial Times article based on French President Hollande’s speech on
Brexit,” said Angus Nicholson, a markets analyst in Melbourne at IG Ltd. “
Given low volumes in the Asian session, it would have forced other
algorithms to join in and magnify the fall.”
The drop versus the dollar could be due to an erroneous order and flows
related to stop-loss orders or options, given dollar-yen or euro-dollar aren
’t moving much, according to Toshihiko Sakai, Tokyo-based chief manager of
foreign-exchange and financial products trading at Mitsubishi UFJ Trust &
Banking Corp.
“It’s a timeslot where you often see sudden moves, but it looks like there
were moves to cut losses,” said Tomoichiro Kubota, a senior analyst at
Matsui Securities Co. in Tokyo. There were no major new fundamental changes,
but “it looks like there was selling that honed in on a time of day when
there’s lower liquidity.”
Leaving the EU has been the main topic at the ruling Conservative Party’s
annual conference this week, where U.K. Prime Minister Theresa May seemingly
moved closer toward a so-called hard Brexit that would restrict access to
the European Union’s single market so that the government can control
immigration. Sterling has tumbled since May’s speech on Sunday,
accelerating losses as she was said to take the view that financial services
would get no special favors in EU exit talks.
With March now set as the deadline for triggering divorce proceedings,
tensions are playing out in the currency market. The pound has dropped 16
percent since the referendum to leave the world’s biggest single market,
and is 2016’s worst-performer among 31 major currencies tracked by
Bloomberg. Companies including Goldman Sachs Group Inc. and
AllianceBernstein Holding LP have issued predictions for more pain ahead.
by Hiroko Komiya
October 6, 2016 — 6:27 PM CDT
Updated on October 6, 2016 — 7:33 PM CDT
British one pound coins stand stacked near the printed face of Queen
Elizabeth II on a five pound banknote in this arranged photograph taken in
London, U.K., on Thursday, Jan. 2, 2014. The pound was the strongest
performer among a gauge of 10 developed-nation currencies in the second half
of 2013 as improved economic data boosted bets the Bank of England will
tighten monetary policy. Photographer: Chris Ratcliffe/Bloomberg
Pound in Freefall Hurts U.K. Bonds as Goldman Sees More Losses little line
above headline
HONG KONG - JULY 05: Competitors paddle their boats during the Tug of War
Fun Race at the Hong Kong Dragon Boat Carnival Race on July 5, 2015 in Hong
Kong, Hong Kong. The Hong Kong Dragon Boat Carnival will be staged from 3
July 2015 (Friday) to 5 July 2015 (Sunday). The carnival featured two key
programmes: the CCB (Asia) Hong Kong International Dragon Boat Races in
Victoria Harbour and the San Miguel BeerFest at the UC Centenary Garden in
East Tsim Sha Tsui. (Photo by Anthony Kwan/Getty Images for Hong Kong Images
)
Singapore Is Crushing Hong Kong in the Race to Cut Home Prices little line
above headline
Theresa May, U.K. prime minister, waits to greet Nicos Anastasiades, Cyprus'
s president, outside number 10 Downing Street in London, U.K, on Tuesday,
Sept. 27, 2016. May needs to trigger the start of negotiations on the
country's exit from the European Union before the end of March, the EUs
economics commissioner said in the strongest indication yet of what the bloc
considers acceptable timing. Photographer: Simon Dawson/Bloomberg
The pound plunged as much as 6.1 percent against the dollar, the biggest
decline since the day the U.K.’s Brexit referendum result was announced, in
a move that traders struggled to immediately explain.
Sterling sank as low as $1.1841, according to data compiled by Bloomberg,
the lowest since March 1985. The pound quickly pared the drop, trading 1.1
percent weaker at $1.2472 at 9:26 a.m. in Tokyo. Traders questioned whether
computer-driven orders had triggered the plunge, exacerbated by a lack of
liquidity in early Asian hours, while some saw the possibility of human
error, or a so-called “fat finger.” Others pointed to a Financial Times
article citing French President Francois Hollande as saying the U.K. must
suffer the consequences of leaving the European Union.
“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," Naeem Aslam,
chief market analyst of Think Markets wrote in a note. “Hard Brexit has
haunted the sterling."
The pound dropped as much as 6.5 percent versus the euro and was down 1.1
percent at 89.37 pence per euro. The FT reported that Hollande, speaking in
Paris at a dinner attended by EU officials, urged the bloc to lead tough
negotiations with Britain to avoid contagion and protect the fundamental
principles of the single market.
“It looks like it was a algorithm-driven flash crash triggered by a
Financial Times article based on French President Hollande’s speech on
Brexit,” said Angus Nicholson, a markets analyst in Melbourne at IG Ltd. “
Given low volumes in the Asian session, it would have forced other
algorithms to join in and magnify the fall.”
The drop versus the dollar could be due to an erroneous order and flows
related to stop-loss orders or options, given dollar-yen or euro-dollar aren
’t moving much, according to Toshihiko Sakai, Tokyo-based chief manager of
foreign-exchange and financial products trading at Mitsubishi UFJ Trust &
Banking Corp.
“It’s a timeslot where you often see sudden moves, but it looks like there
were moves to cut losses,” said Tomoichiro Kubota, a senior analyst at
Matsui Securities Co. in Tokyo. There were no major new fundamental changes,
but “it looks like there was selling that honed in on a time of day when
there’s lower liquidity.”
Leaving the EU has been the main topic at the ruling Conservative Party’s
annual conference this week, where U.K. Prime Minister Theresa May seemingly
moved closer toward a so-called hard Brexit that would restrict access to
the European Union’s single market so that the government can control
immigration. Sterling has tumbled since May’s speech on Sunday,
accelerating losses as she was said to take the view that financial services
would get no special favors in EU exit talks.
With March now set as the deadline for triggering divorce proceedings,
tensions are playing out in the currency market. The pound has dropped 16
percent since the referendum to leave the world’s biggest single market,
and is 2016’s worst-performer among 31 major currencies tracked by
Bloomberg. Companies including Goldman Sachs Group Inc. and
AllianceBernstein Holding LP have issued predictions for more pain ahead.