in the Night from Thursday to Friday 7 October will go down in history the foreign exchange market. In just 2 minutes the British pound fell sharply and it lost almost 6% against the dollar (the so-called flash crash) that caused such a strong change in on other currency pairs. Perhaps it was not this event in the extent of speculative attack on the British currency from 1992 made George Soros, but it was so significant that the collapse of the course (1,4790 to 1.3230 dollar) on the day after the June referendum ws. of a British exit from the European Union (the so-called BREXIT).
Tonight quotes GBP/USD at one point was off more than 1.26 to 1,1906 dollar (platform easyMarkets, because, for example, Reuters kwotował GBP/USD even after 1,1809 dollar), setting her new 31-year low. However, then the pound started to win back, but to levels from yesterday are still very far away.
Along with GBP/USD tąpnął GBP/PLN. At one point he fell off 4,8365 to 4,5675 rubles (Wednesday at the end of the day it was 4,8880 RUB). The pound was thus the cheapest from 5 years. It’s hard to believe that just 11 months before it was necessary for him to pay more than 6.08 rubles, that is from 2005. Bah, back in may of this year and it was almost 5,83 rubles., and in early September 5,2150 rubles.
Source: easyMarkets
you Can specify multiple possible sources of today’s the night of the collapse of the pound. It is likely that large erroneous orders to sell British currency. In slang this is called “fat boy.”. This is a situation where someone makes a mistake and charges sale much more currency than gathered (for example, confusing “one zero”, and releases the order for the sale of 1 billion pounds instead of 1 million pounds STERLING). Other reason is low liquidity of the currency market at night, as well as the execution of stop loss orders (they are automatically closed foreign exchange positions, when the loss from this operation reaches certain based investor level).
After a stormy night stocks pound, but then returned, making a big Hello to damages, but it is listed lower than before the collapse. At 12:43 GBP/USD tested the level of 1,2350 of the dollar, and GBP/PLN 4,7470 rubles. The notorious milk, so pouring. Fear and reluctance of the remaining pound. It can be assumed that the accumulation of these negative emotions, along with the fundamental reason behind the fall of the pound in recent months, zepchną prices even lower.
the currently Observed weakness of the British currency has a complete fundamental justification. This is the effect of incessant fear of the economic consequences of BREXIT. As well as taking place after the June referendum in the UK, return to the monetary policy conducted by the Bank of England (BoE). Especially this deficiency. Until about to leave the EU was widely acknowledged that the Bank of England will be second only to the American FBI major Central Bank to raise interest rates. Meanwhile, not only they are not raised, but lowered. In August the Bank lowered rates on the Islands by 25 bps (the first decline since 2009), while deciding to increase its asset purchase programme at GBP 435 billion from the current 375 billion pounds. In addition, the Bank of England has launched 2 new programs. The first worth 10 billion pounds and is intended for the purchase of corporate bonds. The second is worth up to 100 billion pounds, which should ensure that commercial banks did not restrict credit, despite lower interest rates.
Night flash crash is another pebble in this avalanche of events that pushed the pound to all lower levels. Especially that today this currency does not help macroeconomic data from the British economy In August, the annual dynamics of industrial production dropped to 0.7% from 2.1% a month earlier, which is the result of significantly below market expectations (1.3% y/Y). The second month of the holidays also brought the growth of the UK trade deficit to 12.1 billion pounds from 9.5 billion pounds deficit in July against the forecast of about 11.2 billion pounds deficit.
Given the above, should get used to the idea that after a period of stabilization and calming of sentiment, the pound will continue to lose in price. The first objective allotted tonight lows on GBP/USD and GBP/PLN. Accordingly, the levels 1,1906 4,5675 dollar and gold. Re verification is possible in this year. Thus, the repeated achievement of these levels does not have to mean the end of the revaluation. It is possible that in the context of growing fear over BREXIT-em the following year, the GBP/USD down to 1.10 dollar. At the current exchange rate of the dollar to gold would mean a drop in prices GBP/PLN… of 4.22 UAH.
signs of the flash crash was an important lesson for investors from the currency market. Even after the liberation of the Swiss franc, after failure of the referendum ws. BREXIT. He showed that you can have the perfect investment strategy and good position control, but maybe that is not managed to avoid losses. Therefore, in situations such as this, today, with the pound, is important to include such elements as guaranteed stop orders, a guarantee of protection from the negative balance because I trade almost fixed spreads in kwotowaniu currencies. Investors should remember this, because such “fast krachy” from time to time will happen.
Martin Kiepas, chief analyst easyMarkets
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