Posting up this from 2016 as the explanations are still 'relevant' for today's move.

'Today's move?' you ask …. ICYMI:

START AT THE BOTTOM AND READ UP ...

OK, these from 2016 when GBP dropped 700 odd points against the US at a similar time of the day. Here is the original post link:

  • "Low liquidity amplified the move. People suspect a 'fat finger' triggered stop-loss orders"
  • "The move was exacerbated once stops were tripped below a key level
  • "This is still the thinnest time of day for anything pretty much, the gap between New York and Tokyo. It's probably the time of day where you'll get the sharpest move for the smallest amount of selling"
  • "The speed of the move looks like a kind of a flash crash, some sort of failure,"

And finally, the good 'algo' excuse …

  • "It looks like it was a algorithm-driven flash crash triggered by a Financial Times article … Given low volumes in the Asian session, it would have forced other algorithms to join in and magnify the fall."

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There are lessons in here, I reckon this is the most important:

Adam expanded further:

I would strongly advise you to be suspicious of those offering glib, simplistic explanations like 'its all the algos fault' or 'manipulation'. A little thought will expose the vacuousness of these.