Sterling is continuing its disastrous run on Friday, down over 2% after a “flash crash” in early Asian trade.
The pound sunk as much as 6% against the dollar overnight before recovering. But at about 10 a.m. BST (5.00 a.m. ET) it started slipping again and is now down over 2% against both the dollar and euro.
Here’s how the pound looks at 11.20 a.m. BST (6.20 a.m. ET):
And here’s how it looks against the euro:
You can see that the pound is now lower against the euro than it was during last night’s flash crash. The pound is on track to fall around 4% against the dollar this week.
Connor Campbell, financial analyst at SpreadEx, says in an email this morning:
“If the pound was a prize fighter the referee would have already rung the bell, the currency bloodied and bruised beyond belief. It seems that sterling is recreating last night’s flash crash in slow motion, its losses against the dollar widening to 2.6%, taking it under 1.23 in the process; against the euro things were just as bad, the pound plunging under 1.13 following a 2.4% fall.
“Beyond the post-flash crash fear that seems to have taken hold of investors, the intensification of sterling’s decline can largely be pinned on 2 factors this morning. Firstly, both the manufacturing and industrial production readings came in below expectations at 0.2% and -0.4% respectively, somewhat contradicting the positive PMIs from earlier in the week. Secondly, and perhaps most damningly, HSBC issued a pretty bleak statement claiming that, as the ‘de facto official opposition to the government’s [Brexit] policies’, the pound could well find itself circling $1.10 by the end of the year.”
HSBC’s chief currency strategist David Bloom said in a note that he expects the pound to reach $1.20 by the end of the year and warns the currency has become a political football for “vigilante” currency traders.
Comments from European leaders on Brexit negotiations haven’t helped either. Both French President Francois Hollande and European Commission chief Jean-Claude Juncker have signalled Europe will take a tough stance in negotiations.