GBP/USD flash crash, Trump off the hook on Comey video to blame?

Currently, GBP/USD is trading at 1.2930, down -0.30% on the day, having posted a daily high at 1.3050 and low at 1.2889.

GBP/USD has just been dumped hard in a flash crash on the 15 min sticks. The move comes as a freak event without an explanation as yet, although the dollar has caught a bid on the Comey video that is doing the rounds that have him saying he wasn't pressured to end an investigation and that he wasn't pressured politically. Markets are taking this as if he has said under oath that Trump did not pressure him and this Trump could be off the hook.

Either way, one could be too quick to jump to conclusion that the pound's drop was due to a fat finger or stop hunting. This is the third flash trade we have seen since 7th October's. There is not as much liquidity in NY or Asia as there is in London, so it may not take much to push sterling through key technical barriers and find a void of bids in the market, which seems to have happened in this case.

The October crash, when the pound plunged by 9 percent against the dollar in seconds in overnight trading, was attributed to the following, according to BIS:

  • Significant sell orders for sterling from traders
  • Automatic stop-loss orders
  • A Financial Times report considered to contain negative news for sterling
  • Inexperienced sterling traders working at that time of night in Asia with “lower risk appetite.”

GBP/USD levels

Sterling managed to break the 1.30 handle to 1.3049 the high o/n. This was its highest level since September 2016. the move came on the back of the UK Retail Sales report. "Official data showed that sales surged by 2.3% in April whilst the YoY reading printed 4.0%, both doubling market's forecasts," noted Valeria Bednarik, chief analyst at FXStreet. 

GBP/USD now in no man's land?

"The market needs to go back below the April 21 low at 1.2760 to negate upside pressure completely," explained analysts at Commerzbank, adding, " this would introduce scope to the 200-day ma at 1.2595."