CME Halts British Pound Futures After Flash Crash to New Record Low vs the Dollar – Mish Talk

September 27, 2022

Pound Pounded

The British pound fell to $1.0349 during early trading hours on Monday, breaking its previous record low in 1985.

This morning the CME temporarily halted the trading of British Pound futures following a Currency Flash Crash and Record Low in the Pound.

Cable reached ALL-TIME record lows (~4.5%) in the early hours of Monday’s Asian trade after an aggressive flash crash occurred due to thin liquidity to support the pound generally caused by a domino effect from electronic trading systems executing trades.
CME Group had to halt GBP futures trading as a result of the flash crash.
Two primary factors for this unexpected move are attributed to a combination of a skyrocketing US dollar (from last week’s 75bps rate rise), in addition to the UK’s mini-budget announcement which included several tax cuts that seemed to weigh heavily on the GBP.
The British pound was already facing negative sentiment from traders/investors on Friday, after the UK’s new chancellor Kwasi Kwarteng announced his new mini-budget that could widen the fiscal deficit.

British Pound Since 1991

British Pound chart courtesy of StockCharts.Com, but excluding the flash crash

From the record high of 2.116 in late 2007 to the bottom of the flash crash, the pound has fallen 50 percent vs the US dollar.

When a chart is at record lows, there is no technical support. At record highs there is no resistance.

How low the pound can fall is anyone’s guess.

Strong Dollar Fatigue: Japan’s Yen Intervention Will Not Work. How Can It?

On September 23, I noted a Japan’s intervention to support a collapsing yen, stating Japan’s Yen Intervention Will Not Work. How Can It?

Scroll to Continue

Japan has intervened in the Forex markets to defend the Yen. Let’s discuss why that tactic will not work, and the irony of the process itself.

The UK and EU are at the mercy of Putin’s natural gas shutoff and their falling currencies exacerbate their energy woes.

Japan suffers from a central bank still holding interest rates in negative territory.

End of the 40-Year Bull in Debt and a “Global Depression” Threat

I have been discussing the possibility of a currency crisis for years, suggesting that Japan was a likely candidate.

david green bank