Here’s a live example of “false news shock” – the tendency of erroneous news to move markets even after it is proved to be wrong.
Just after 1pm on Thursday, Sterling jackknifed – falling from 1.64 to the dollar to a low of 1.61 and moving above 0.87 to the euro.
Someone called Sugardaddy posted this on Dealbreaker in New York at 8.04, EST – causing the “rumor” to be emailed across dealing rooms.
It’s not true, of course.
Thursday was polling day in Britain, with 34 local councils holding elections along with European parliamentary elections. Whatever trouble Brown is in, it would be very odd indeed if he were to resign today.
Despite a firm denial from No10, who described the rumour as “absolute nonsense,” sterling only managed a partial recovery.
Update: The FT’s currency correspondent Peter Garnham has a different theory. He says that “the sudden fall in GBP and subsequent rumours, seem to have been born from a massive M&A deal going through with estimates around $5bn”. Curioser and curioser.