Flash crash rocks pound as Hollande warns on Brexit

London, October 7

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Sterling suffered a dizzying “flash crash” against the euro and dollar today in a computer-generated selloff, sending Brexit shockwaves across markets after France warned of perils ahead for Britain.

The pound plunged more than 6% against the dollar in under 10 minutes in Asian trading hours — at the end of a tumultuous week of heavy losses after Prime Minister Theresa May signalled she would trigger Britain’s departure from the European Union by the end of March.

A spokesman for the Bank of England said it was “looking into” the cause of the flash crash — a vertiginous drop in an asset’s value that can be triggered and exacerbated by automated trading systems.

Speaking yesterday, French President Francois Hollande said the EU should take a tough line with London during exit talks to prevent the break-up of the bloc.

“The value of sterling plummeted overnight as algorithmic trading programmes apparently triggered a crash,” said XTB analyst David Cheetham.

“Comments from French President Hollande (surfaced) a minute before the selling began, so it seems far more plausible that news-scanning algorithmic trading systems began a move which gathered momentum.”

Cheetham added that a combination of trades placed by algorithms and stop-loss orders can “exacerbate the move, which is commonly seen to retrace by a significant proportion of the decline within a matter of minutes”. AFP