The pound has suffered a mysterious sudden collapse, causing one expert to say the foreign exchange market bears an “uncanny resemblance to the five stages of grief” after the Brexit vote.
The Bank of England said it was “looking into” the flash crash that sent sterling plunging 6% overnight - its lowest value since Britain voted to leave the EU.
At one point it was worth almost one euro, and Travel money expert FairFX claims that some airports are already offering less than €1 to the pound.
One HSBC expert said Sterling was performing so badly it was now the “de facto official opposition” to the UK government’s policies.
In a damning assessment, David Bloom, chief currencies analyst at HSBC said: “Sterling used to be a relatively simple currency that used to trade on cyclical events and data, but now it has become a political and structural currency. This is a recipe for weakness given its twin deficits.
“The currency is now the de facto official opposition to the government’s policies,” The Financial Times reported Bloom as saying.
Analysts blaming a “rogue algorithm” that reacted to Brexit headlines for the shocking crash.
“The FX market is exhibiting an uncanny resemblance to the five stages of grief,” Bloom continued. “First, following the Brexit vote came the denial – theories circulated whether a second referendum would have to take place. Second was anger – claims the vote was unfair.
“Third was the bargaining – arguments maybe it wouldn’t be that bad, what if the UK followed the Norwegian or Switzerland model. Now the fourth a gloom is prevailing over sterling.”
The ‘flash crash’ was specifically linked to news of Brexit comments made by the French President Francois Hollande.
Adam Cole at RBC Capital Markets told poundsterlinglive that the drop was “Ostensibly triggered by harsh comments on UK exit terms from French PM Hollande”.
Kathleen Brooks at City Index said: “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.
“Once the pound started moving lower then more technical algos could have followed suit, compounding the short, sharp, selling pressure.
“Thus, the pound has been the victim of the digital, headline-driven world that we live in today. For sterling, algorithms have become the modern-day version of a George Soros.”