Extreme volatility has caused a stir on the currency markets this European afternoon after a sloppy tweet by the Financial Times. About 10 minutes before the scheduled time for the release of the European Central Bank’s (ECB) statement regarding interest rates, set for 12:45 GMT, the Twitter account belonging to the financial newspaper proclaimed that there won’t be a cut in rates.
As a result, short EUR/USD traders headed for the exits and liquidity disappeared from the market for several seconds on some trading platforms in the run up to the official announcement by the ECB.
It would all have played out well for the Financial Times if the European Central Bank had indeed left rates unchanged. Come 12:45 GMT, the official statement read that the Governing Council of the monetary policy setting body of the Eurozone has decided to cut rates further into negative territory.
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The rollercoaster continued and resulted in a number of swings. Before any of the events described above hit the wires, the EUR/USD was quietly trading around 1.0543. In the aftermath go the ECB tweet, the rate spiked to about 1.0678 only to get hammered and mark a new multi-month low around 1.0515. Profit taking kicked in and a new high at 1.0692 was hit moments after the announcement.
If there was any way to stress test a risk management system for brokers, today was a great day to have a look at how it is faring. A number of brokers have been requiting clients with some platforms freezing in the aftermath of the rate decision.
While the Swiss National Bank black swan was an event on a much greater scale, today’s events show that a number of brokers continue to be experiencing technical difficulties that may hit them hard at some point in the future.
Meanwhile, the team at the Financial Times better get some due diligence applied to its Twitter feed and its sources… unless it has a trading department of its own.