It is not a common phenomenon for a currency to drop 1% in a couple of seconds, however yesterday was one of those days and even more. After being under pressure for most of the day, the GBP dived 700+ pips (or 6.1%) in a second. No one knows exactly what happened but the most discussed reason today is that it was a computer error or else known as “fat finger”, since there was no real news at the time. This was a move that was even larger than the Brexit vote. Yesterday, both German Chancellor Merkel and French President Hollande called for a tough line on Brexit, saying that the UK’s single market access will be in jeopardy if it restricts the movement of people. In the news, the highlight of the day is the US NFP jobs report at 12:30 GMT. Economists expect NFP to show 173k growth in September with unemployment rate unchanged at 4.9%. Average hourly earnings are expected to grow 0.2% mom. Any deviation from the expected numbers, will spark a new wave of volatility.
Currencies: While everything was as normal as it gets, at 23:07 Gmt, out of nowhere, the GBPUSD dropped from 1.2609 to at least 1.19 but it quickly bounced later on and is now trading at 1.2450, still about 1.5% lower. As a result, currency crosses such as EURGBP and GBPJPY posted new highs and lows respectively. EURGBP hit 0.9346 before trading back to 0.89 and GBPJPY dove to 122.50 before recovering to 1. 2890. There were no trade associated news at the time, so the reason for the massive drop was more likely a computer mistake (flash crash as it is called) or a fat finger (a mistake the involves a much larger trade being placed in the market, instead of the intended smaller one). The Dollar will wait for cues from the US NFP Report later today.
Stocks: Despite the mayhem in currency markets, stock markets traded on a lighter tone. Nikkei closed down at -0.23% as the USDJPY rose from 103.54 to 103.95. In the US, stock markets closed flat ahead of the NFP report. The German DAX just now has opened slightly lower, while UK Futures indicate a higher opening.
Oil and Gold: Gold prices have been under pressure yesterday dropping from $1269 to $1250 before bouncing to $1254 at time of writing. The rumors of Central Banks stopping their QE, the possibility of a December rate hike cycle beginning and overall USD strength, has been a catalyst to GOLDS weakness as of late. This week alone, the shiny metal suffered a $60 drop. On the contrary, OIL prices continue to be on the rise with OIL surpassing the $50 mark, for the first time in almost 3 months.
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