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Sterling nosedives overnight

Sterling nosedives overnight

The Pound suddenly plummeted to near-parity against the Euro and tumbled by around six percent versus the US Dollar in overnight trade, shocking the global markets. It appears that the decline is being dubbed a “flash crash”.

Some market participants are blaming French President Hollande’s “hard-Brexit” comments for the dramatic drop. However, there are also reports that a “fat finger error”, which drove algorithm-trades haywire, was responsible and this caused the over-inflated move in the Pound against both EUR and USD.

The Pound moved from near the 1.2615 level against the Greenback quickly to fresh multi-decade lows of 1.1841 in a matter of minutes, before recovering almost six figures to now trade around 1.2430 levels, still down -1.50% on the day.

The Euro kept its risk appetite fairly stable against the Dollar as the US Federal Reserve expressed confidence in economic growth. This may not be enough to move the market as speculation begins to settle. The European Central Bank (ECB) monetary policy meeting has kept its expectations for economic growth and inflation fairly flat, as the Fed’s target for a 2% rate remains in the clouds.

With the Pound’s tumble overnight, the Dollar rose to a fresh 31-year high to the 1.2300 levels which gained an additional 6% in a matter of minutes overnight. The move was probably partially due to USD strength in the wake of strong jobless claims data as the number of Americans filing for unemployment benefits unexpectedly fell last week, close to a 43-year low.

The Dollar marginally improved during New York’s trading session yesterday and made fresh highs for the day, as the Dollar traded firmer in an overall quiet environment yesterday ahead of the Nonfarm payrolls report due today.This US September payrolls data will be the key driver of currency trading today. The market forecasts a 172,000 rise in Nonfarm payrolls after a disappointing 151,000 growth in August.

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