‘Flash’ currency moves will continue to surprise markets – BoE’s Salmon

The executive director for markets at the Bank of England has said he expects further "flash moves", similar to the sterling crash in October 2016, to "surprise markets".

Speaking on January 24, Chris Salmon said despite financial markets now having the ability to "process identifiable risk", the modernisation of markets has led to a "growing potential" for flash events to occur.

"The events of October 7 highlight the vulnerability of such markets to seemingly unprompted flash price movements," he said.

Where central banks might previously have expected the depth of liquidity and breadth of participation to provide some protection against such stresses, he explained, the way markets have adapted to technological advances now poses a risk.

"I equally expect flash moves in the selfsame markets to continue to surprise us, even if I cannot hope to predict precisely when or in what instrument or currency pair the next significant flash event will occur," Salmon said.