Wednesday's session was marked by UK Services PMI figures. The Business Activity Index remained above the no-change mark of 50.0 in September, at 52.6, signalling growth of UK services output. Down slightly from 52.9 in August, the latest figure Markit / CIPS UK Services PMI indicated a further moderate rate of expansion at the end of the third quarter, following a contraction in July in the wake of the EU referendum. The rate of expansion in the latest period was weak in the context of historical data, however, with the Index below its long-run level of 55.1. The Index averaged 50.9 over Q3 as a whole, the lowest since Q4 2012.
On Friday UK Industrial Production data was released. Comparing August 2016 with July 2016, production output is estimated to have decreased by 0.4%. There were decreases in 2 of the 4 main sectors, with the largest contribution coming from mining and quarrying, which decreased by 3.7%. Manufacturing was estimated to have increased by 0.2% between July and August 2016. Transport equipment provided the largest contribution to growth, increasing by 2.5%.
However Friday was marked by an extraordinary 10 per cent flash crash by the British pound which has left currency traders baffled about its cause. At 10:07am (AEST) the pound suddenly crashed from $US1.26 against the US dollar to a fresh 30-year low below $US1.14 in a matter of seconds. Over the next 10 minutes the pound regained much of the loss to be trading down a little over 1 per cent lower in early Asian trade.Currency dealers contacted by the ABC this morning were largely at loss to explain what caused the violent move.
However, it was noticeable that the crash occurred on very low volumes and the selling momentum was most likely amplified by the triggering of automatic stop-loss orders. RBC Capital Markets managing director and chief economist Su-Lin Ong said the pound had already been under considerable pressure as fears about a hard "Brexit" mounted.
