The pound briefly crashed more than 6% against the dollar in overnight trading on Friday, in a "flash crash" that hit a 31-year low of just below $1.20 for a few minutes before recovering to around $1.24.
On 23 June, the day before the UK voted to leave the European Union, the pound was at $1.49 against the dollar.
The crash marks the eighth time this year the pound has hit a 31-year low versus the dollar, according to analysis by BuzzFeed News, as the economic consequences of Brexit cause traders to move funds out of the UK.
Four of the eight lows came in the last week, following announcements from prime minister Theresa May and her government that suggested the UK would seek a “hard” Brexit, prioritising reducing immigration over business interests.
The moves have prompted alarm from city analysts and traders, and seen a steady slide in the value of the UK's currency.
In 2016 the pound has hit lows against the dollar on 24 June, 27 June, 5 July, and 6 July, and then on 4, 5, 6, and 7 October.
What caused the "flash crash"?
No one knows for sure why the pound briefly fell so sharply in the early hours of Friday morning, but it's likely the initial drop was caused by some tough talk from France's president, François Hollande, about the need to make sure the UK doesn't get too good a deal from Brexit.
“The UK has decided to do a Brexit, I believe even a hard Brexit," he said at an evening event. "Well, then we must go all the way through the UK’s willingness to leave the EU. We have to have this firmness.
“There must be a threat, there must be a risk, there must be a price. Otherwise we will be in a negotiation that cannot end well.”
These remarks prompted a sell-off of sterling that analysts suggested may have triggered some automatic "stops" – algorithms designed to cap how much traders can lose – leading to a chain reaction of selling. This "flash crash" was quickly rectified, but the pound remained more than a cent lower against the dollar afterward.
What are experts saying about the pound?
City analysts – often quite a sober crowd – are saying in clear terms that the drops in currency are related to Brexit and the policies set out by Theresa May and her ministers at the Conservative party conference.
"Sterling used to be a relatively simple currency that used to trade on cyclical events and data, but now it has become a political and structural currency," said HSBC analyst David Bloom in a note.
"This is a recipe for weakness given its twin deficits. The currency is now the de facto official opposition to the government’s policies.
"The FX market is exhibiting an uncanny resemblance to the five stages of grief. First, following the Brexit vote came the denial – theories circulated whether a second referendum would have to take place. Second was anger – claims the vote was unfair. Third was the bargaining – arguments maybe it wouldn’t be that bad, what if the UK followed the Norwegian or Switzerland model. Now the fourth a gloom is prevailing over sterling."
Citi went even further, suggesting that on current trends "a test of the all-time low in sterling cannot be written off". The pound's all-time low against the dollar was $1.05 – almost 20% lower than its current value.
Thank you, Citi's Sam Underwood, for this graphic in your note on the pound flash crash this morning
Why is it always a "31-year-low"?
In February 1985 – 31 years ago – the pound hit its all-time low against the dollar, which at $1.05 was a long way below even its post-Brexit value. The fall was largely because the dollar was incredibly strong at the time.
Within hours of the UK's vote for Brexit, the pound plunged 12% against the dollar to just over $1.30. This was, at the time, the lowest it had been since 1985. As a result, any time the pound slips further, even if only by a fraction of a percentage point, marks a new "31-year" low.
Given the pound is, at the time of writing, at a 31-year low, if it drops even by $0.001 tomorrow it will mark a new 31-year low. We can expect to see that phrase a lot in the months to come.
The consensus among analysts is the pound will continue to fall over the coming months. Analyses differ, but the consensus is for the pound to hit around $1.20 by early 2017. It is likely to drop fairly sharply as and when Theresa May triggers Article 50, the formal process for leaving the EU.
What does a weak pound actually mean in practice?
Reminder: Please do NOT put the new fivers, or indeed any sterling notes, in the tumble drier/wholesale FX market
In short, anyone who gets paid in pounds is about 15% poorer than they were on the 23 June.
For most people, this is most obvious when buying holiday money, but it directly affects us in lots of ways that aren't so immediately apparent. The drop in the pound means anything we import – which includes a lot of our food, electronics, clothes, and so on – will start rising in price as each pound goes less far than it used to.
The flipside of this is that British stuff starts looking like quite a good deal to people who are paid in dollars, euros, or other currencies. Tourism is likely to benefit as the UK becomes (relatively speaking) a much cheaper holiday destination (and as Brits look to holiday at home as an overseas trip is pricier).
Goods and services that the UK exports may also benefit, but in practice this can be quite complicated – lots of UK manufacture is complex, and involves assembling imported parts, meaning that a drop in the value of sterling is not the unambiguous boost to trade that some ministers like to paint it as.
The final effect worth watching is that as sterling falls, the UK's main stock market – the FTSE 100 – rises.
These increases (the FTSE is very near an all-time high) are often used by pro-Brexit figures to show the UK economy is booming post-Brexit – and they do seem to scotch some dire warnings from Remainers.
However, the FTSE 100 includes lots of global companies who take most of their income in dollars or other currencies and make most of their money outside of Britain.
Because the FTSE 100 is denominated in sterling, any fall in the value of the pound results in a pretty much automatic rise in stock prices – so a lot of the rise is nothing to do with the companies being worth more, but just that the pounds used to value them are worth less.