Sterling had a horrendous week last week. At one point on Thursday evening, sterling lost over 6% of its value following a flash crash, which the Bank of England (BoE) is “looking in to”. The sharp drop came after a story was published by the Financial Times about French President Francois Hollande demanding ‘tough Brexit negotiations’. However, this type of story would not be enough to trigger such an aggressive reaction. Instead, many are attributing the sharp move in sterling to an anomaly from an automated trading system.
Looking to the week ahead the flow of economic data is fairly light from the UK. In reviewing the recent price action much of the volatility surrounding sterling has been influenced by political developments surrounding Brexit. Bearish sentiment continues to prevail as dovish comments surrounding tough negotiations dominate the headlines. The harsh reality is that the UK is sailing into the unknown. Economist and technical analysts normally examine and reflect on what has happened before or the ideas of ‘history repeating itself’. Given that Brexit is a brand new “historical event”, it is easy to see why sterling is so volatile when newswires break stories surrounding it. Expect a busy week for sterling..