GBP flash crash

10th October 2016

Daniel Pfund, Senior Financial Analyst, Fund Manager

In the night from Thursday to Friday, the British Pound experienced a mini flash crash. The fall was certainly accentuated by low liquidity due to the late hour (1 o’clock in the morning) and was probably caused by algorithmic trading. Finally the Pound stabilised with a loss of about 2% against the US Dollar. However the Pound is, according to many commentators, expected to fall more, following the speech of Theresa May about Brexit, expected to be “strict”. This will help British exports, but will penalise the majority of people, as the United Kingdom imports more goods than what it exports. Consumers will also be more cautious as many are unsure about their jobs. It looks more and more likely that several banks will leave London for places in the European Union, such as Luxembourg or Germany. Negotiations between the United Kingdom and Europe will probably be lengthy and tedious.