British pound’s rapid plunge triggers Brexit fears
A DIZZYING “flash crash” of the British pound sent shockwaves across global markets already hypersensitive to Brexit issues on Friday and raised fresh questions about the power of thinly regulated program trading.
Meanwhile, the much-awaited US jobs report for September, expected to underline the case for a Federal Reserve rate rise, underwhelmed, leaving the rate question unresolved. In a still-unexplained move, the pound plunged more than 6 per cent against the dollar within minutes in Asian trading hours.
The currency fell off a cliff on Thursday night British time to strike a 31-year low at $1.1841, before rebounding quickly above $1.2439.
The euro also hit a six-and-a-half-year high against sterling at 94.15 pence. On Friday evening British time, the pound was at $US1.2439, and at 90.01 pence on the euro.
Britain’s finance minister Philip Hammond downplayed the crash, blaming “technical factors” in the market. “Markets will go up and down — markets respond to noises.”
But Bank of England Governor Mark Carney asked the Bank for International Settlements to look into cause.
The pound’s plunge capped a tumultuous week of increasing market nervousness over Britain’s planned pullout from the European Union, which could deeply affect existing trade and finance relations and slow regional growth.
British Prime Minister Theresa May said last weekend she would trigger the EU departure process by the end of March.