Sterling's punishment: Five charts that show how the pound has been ravaged by Brexit

The pound has been easily the worst perfoming of the G10 group of major currencies against the dollar in 2016

Ben Chu
Economics Editor
Friday 07 October 2016 13:18

Sterling's value against the dollar crashed by 6 per cent in the early hours before partially recovering.

The Bank of England is investigating the causes.

So far explanations range from a "fat finger" mistake by a trader, to a computer trading algorithm gone wrong, to potential market manipulation to make money.

The flash crash...

Reuters Eikon

It was the worst intra-day fall for the UK's currency against the greenback since the night of the 23 June Brexit vote when sterling plummeted by 11 per cent.

It was also the second worst on modern record.

The second biggest daily plunge...

Bloomberg data

Yet the flash crash should not pull our attention away from the much bigger picture of sterling weakness in recent days.

Sterling is now at its lowest level against the dollar since 1985.

The weakest value in 31 years...

And Sterling is down almost five percent this week alone, on the back of fears among traders and investors that the UK is heading for a "hard" Brexit, meaning we would leave the single market by 2019.

This sell-off was triggered by Theresa May's speech at the Conservative Party conference on Sunday saying that she would commence the two-year divorce by next March.

The brutal week...

Reuters Eikon

And the pound has been easily the worst performing of the G10 group of major currencies versus the dollar this year.

A very bad year...

Reuters Eikon data

And there could be worse to come.

Analysts say data on the weight of bets in the currency markets suggests that there is a 7 per cent chance of sterling ultimately sinking so low within the next year that it hits parity with the dollar.

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