NEWS

Pound To Euro Exchange Rate Falls Again After Friday 'Flash Crash'

'At least we got our country back.'

10/10/2016 13:43 | Updated 10 October 2016

Any hopes of the pound recovering after Friday’s “flash crash” were smashed at the opening of markets on Monday morning as trade-weighted Sterling fell to its lowest level since January 2009.

Kathleen Brooks, research director of City Index, said she feared political talk of a “hard Brexit” had made the pound “toxic” as speculators bet against it.

The currency opened at 1.111 against the Euro, rising slightly to 1.1126 by midday.

HSBC has predicted the pound will hit parity against the Euro by the end of the year meaning a 1:1 exchange rate, bad news for holidaymakers but a boost for exports.

Bloomberg
The pound against the Euro so far on Monday.

The mysterious “flash crash” on Friday, which saw some airports offering less than €1 to the pound, is thought to have been caused by automated trading systems reacting to Brexit comments.

Brooks said last week: “Apparently it was a rogue algorithm that triggered the sell off after it picked up comments made by the French President Francois Hollande, who said if Theresa May and co. want hard Brexit, they will get hard Brexit.

“These days some algos trade on the back of news sites, and even what is trending on social media sites such as Twitter, so a deluge of negative Brexit headlines could have led to an algo taking that as a major sell signal for GBP.”

One HSBC expert, David Bloom, said Sterling was performing so badly it was now the “de facto official opposition” to the UK government’s policies.

He added: “The argument which is still presented to us, that the UK and EU will resolve their difference and come to an amicable deal, appears a little surreal.

“It is becoming clear that many European countries will come to the negotiation table looking for political damage limitation rather than economic damage limitation. A lose-lose situation is the inevitable outcome.”

Theresa May has announced she will start Brexit “no later than the end of March”.

She told delegates at the Tory conference last week that she plans to curb immigration, “stoking speculation the nation is headed toward a so-called hard Brexit - with limited access to the EU’s single market” according to Bloomberg.

Against the dollar, the forecast is also gloomy with HSBC predicting a fall to $1.10

The PM’s lurch to a “hard Brexit” stance on EU withdrawal risks destroying Britain’s hopes of remaining an open economy, the head of the CBI has warned.

The business body’s director general Carolyn Fairbairn expressed alarm at the direction of government policies following the fiasco of attempts to get companies to list their foreign workers.

Ms Fairbairn warned that the Prime Minister’s insistence on an immigration crackdown, which dominated the Tory conference, could “close the door” to the UK staying an open trading economy, reports the Press Association.

As ministers scrambled to abandon the plan to “name and shame” companies with migrant workers after it provoked a damning backlash, the CBI chief expressed deep business concern about the post-referendum drift of government thinking. 

Ms Fairbairn told The Times that businesses were appalled at the idea, stating: “They regard it as an indication that it is somehow a shameful thing to be attracting the best talent from around the world, rather than a source of pride.”

The CBI chief warned that jobs and communities would suffer if ministers allowed a post-referendum divide between government and enterprise to form.

“What we have heard over the last few days, if you add up the messages in total, are signs that the door is being closed, to an extent, on the open economy, that has helped fuel investment,” she said.

With the plan to list foreign workers provoking uproar, the Government went into retreat with Education Secretary Justine Greening, saying: “This is not data that will be published. There will be absolutely no naming and shaming.”

David Cameron’s pro-Brexit former policy guru Steve Hilton insisted the idea was worse than Donald Trump’s plan to ban some Muslims from America if he became president.

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