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Liquidity an Issue Again in Further Cable Collapse

Liquidity in FX markets is again a hot
topic following a sharp move lower by Cable in Asian trading.

In the space of a minute sterling dropped
from 1.2930 to under 1.2800 – market sources say liquidity is very thin and
exacerbating the move.

Cable opened the Asian session above 1.3000
but has fallen in two sharp bursts of activity to hit a new 31-year low.

A dealing source in Asia says markets are
“very nervous” and cites a sharp pullback in Cable from under 1.2800 to 1.2840
“on next to no volume” as evidence liquidity providers have become more
cautious. EUR/GBP also made new multi-year highs, touching 0.8625 as the sterling collapse 

The nature of the move highlights the risks
to FX investors from sharp moves – although the dealing source says stop losses
were not likely to have been the driver of the move reinforces the perception
that the market continues to make quick adjustments, making exiting a position
very difficult.

Twitter @lamboPnL

Twitter @Profit_and_Loss

Colin Lambert

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