Robots blamed for wiping 10 per cent off the value of sterling

Algorithms have been blamed for a flash crash that wiped nearly 10 per cent off the value of sterling on Friday morning.

The pound slumped to $1.18 as Asian markets opened from $1.26 the day before, falling briefly to $1.14 – a fresh, threedecade low.

The fall came after French president Francois Hollande demanded a tough stance be taken by the EU during Brexit negotiations amid fears that the UK might actually leave the EU after all – a so-called “hard Brexit”.

Reports are divided on the exact cause of the system meltdown, but it is computers, not human market trades, that are in the frame.

Reports reckon somebody’s fat fingers helped trigger a wave of stop-loss orders that would have automatically sold the point – stop losses are trades that kick in when at a specific price is hit on a stock or a commodity.

Others say that the fingers had nothing to do with it, and the algorithms were triggered automatically.

Low trading elsewhere in the Asian markets raised the profile of sterling against other currencies and stocks, thereby helping accentuate the fall.

Flash crashes hit the headlines in May 2010 when the Dow Jones lost nearly 1,000 points in minutes. The cause was identified as an algorithm that was programmed to sell $4.5bn in futures without limit on price or time, facts the market couldn’t handle. ®