Today early in the morning, during the Asian trading session, GBP fell by more than 6% in just two minutes against the US dollar, reaching the level of 1985 and shocking even experienced traders.
“Initially I have doubts about what I saw on my computer screen,” commented Kenji Yoshii, a foreign exchange strategist at Mizuho Securities.
According to most analysts, the main trigger for such a strong fall of the British currency were the words of the French President Francois Hollande on the rigid position of the EU in the negotiations with the United Kingdom on the issue of Brexit.
Earlier, the Prime Minister of the UK Theresa May has promised to complete the entire procedure of kingdom’s withdrawal from the EU until the end of March next year.
Given that the EU economy is experiencing not the best times, and the ECB has not yet completed its program on the salvation of the region from the economic crisis, Hollande's words can be described as an irresponsible speech of a despair official.
This led to the fact that the GBP currency trading in Tokyo early Friday fell by as much as 6.1% in two minutes, showing the strongest fall since the summer results of the referendum, in which the people of Albion have voted for the country's exit from the EU structure.
At its lows, the GBP reached the level of $1.1841 per pound, a record since March 1985. A little later, the dynamics have changed a bit and the pound adjusted to the level of $1.2437.
At the same time, at least one electronic trading platform fixed GBP buying for $ 1.1378. Some analysts argue that on several trading platforms GBP in just a few seconds lost about 10% of its value, collapsing from $1.2600 to 1.1378 levels.
Also, we can not exclude some additional factors that could add downward energy to the British currency. Among them are: algorithmic trading, the aggressive actions of large hedge funds on the market, or a mistake of a major trader.
It’s worth noting that just last month, financiers of the Bank for International Settlements spoke about the increasing levels of using the electronic trading platforms and about trading algorithms’ proliferation that could play a big role in recent seconds of stress in the fixed-income market, such as an unexpected, sharp selloff of bonds in Germany last year.
At the moment, GBPUSD rate is 1.2228. EURUSD pair is trading near the border of 1.1130 level.
