Bank of England investigates flash crash as pound slumps
Events in the past 24 hours are an example of extreme "overshooting" which renders predictions meaningless
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London
THE Bank of England announcement that it is investigating the remarkable 10 per cent flash crash of sterling, has raised expectations that the central bank will intervene to counter volatility. Regardless, the extent of sterling's devaluation since the Brexit vote has made British exports exceedingly competitive while at the same time prices of energy and other imports are expected to jump in the months ahead.
The events in the past 24 hours were an example of what currency analysts regard as extreme "overshooting" which renders predictions meaningless. Sterling slumped and then rallied within a two minute period during Asian trading hours when UK dealers were fast asleep and volumes were well below average. Perplexed traders and analysts believe that quantitative, high frequency computer programmes initiated sell orders as sterling breached stop loss orders within seconds.
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