Putting aside all jokes about the UK’s disappointment at
losing their “dumbest electorate crown”, I’ll keep this brief because the world
is still coming to terms with how the “experts” once again got it hopelessly
wrong. So just to say yes, the FX market was very orderly yesterday as the
results came in but (there’s always a ‘but’ remember), we are in no way out of
Obviously there are a lot of comparisons of the US election
result and the UK vote on EU membership in June – I actually tweeted yesterday
that it felt the same as the networks refused to make their usual call as polls
closed on the west coast. And just as the unfolding events were an eerie echo
of the “unthinkable” (surely that should be the “unpredicted”?) so I suspect
will the impact on financial markets.
My prediction is we will see more flash moves in the FX
markets in the coming two or three months.
Regular readers will know I
don’t subscribe to the theory that the Cable flash crash was the result of
algos reading an FT headline but let’s assume for a moment that I’m wrong
(hard I know but try!) and the algos were reacting to a headline.
At the moment we are patting ourselves on the back, quite
rightly, because as an industry we are clearly learning from earlier events as
yesterday’s market was smooth and orderly – even in the Mex which obviously
took a pounding (pun intended).
The fact is though, the US president elect is…how can I put
it politely…a loose cannon given to outrageous comments and statements. The
chances of us getting through the next two months before he takes power without
saying something dumb, provocative or simply outrageous seem slim.
There is also a really good chance that some of the
president elect’s speeches, comments and interviews will come as US markets
close or just after. That translates to very early Asia – most likely when
Australia and New Zealand have the markets to themselves.
When did the Cable flash crash occur? Right in that window. So
don’t be fooled by the relatively smooth take off, I suggest everyone straps
themselves in, because this could be a very bumpy ride.