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London - Sterling resumed its decline as investors remained in the dark about the cause of last week’s flash crash and over whether Britain is truly headed for a hard Brexit.
The currency depreciated 4.2% last week, its worst performance since June 24. The slide, which accelerated after Prime Minister Theresa May said at her party conference that she’ll start the process to pull the UK out of the European Union by March, culminated in an unexplained 6.1% plunge during about two minutes in Asian hours on Friday. The currency finished the day down 1.4%.
“The pound has been under depreciation pressure ever since the Tory party conference, in which May quite clearly signaled that the Brexit negotiations may end in a hard Brexit,” said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank in Frankfurt.
“You could see that clearly after the flash crash we had last week. Usually such a flash crash, particularly in such a major currency, should be corrected immediately but it didn’t correct entirely.”
The pound dropped 0.3% to $1.2394 as of 09:41. Sterling weakened 0.2% to 90.20 pence per euro.
Last week’s tumble and flash crash that traders speculated may have been caused by a mistaken order, or a so-called fat finger, led to companies downgrading profit forecasts. It also threatened to fan inflation. Sterling remains the world’s worst-performing major currency this year.
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