04/01/2019 - Flash Crash Jolts Markets

GBP

Global currency markets were left reeling in the early hours of Thursday morning after a ‘flash crash’ in the Asian market. Sterling did not escape the impact of this, and experienced a day of losses as investors become increasingly worried about the health of the global economy.

This ‘flash crash’ was triggered by sales in Japanese Yen, which led to the forced widespread selling of sterling. This was exacerbated by algorithmic programming and thin liquidity. The dramatic drop was then further fuelled by the shock of Apple cutting its sales outlook, which was seen as another sign of a global economic slowdown. This was the first time that Apple have cut this outlook since 2007, with safe haven currencies being the big gainers from the news.

The domestic picture is also continuing to weigh heavy on the pound. There are reduced expectations for a Bank of England interest rate rise in 2019 and continued concerns around Theresa May’s ability to convince MPs to back her withdrawal arrangement. With the parliamentary recess finishing this week, we expect next week to see further volatility as the Brexit debate kicks back into life.

Key Announcements

13:30 – USD: Nonfarm Payrolls (Dec); expected to increase to 177k from 155k
13:30 – USD: Average Hourly Earnings (YoY) (Dec); expected to decrease to 3.0% from 3.1%
13:30 – USD: Average Hourly Earnings (MoM) (Dec); expected to increase to 0.3% from 0.2%
13:30 – USD: Unemployment Rate (Dec); expected to remain at 3.7%
15:15 – USD: Fed Chair Powell Speech