What Black Wednesday teaches today's traders
In 1992 the pound was forced out of the European exchange-rate mechanism and collapsed, while George Soros's fund reportedly made a fortune. The lessons — pegs break, markets can overwhelm central banks — still apply.
What do you take from it?
- the lesson you apply to today's markets
- how you'd spot a similar setup forming
- which current pegs or bands worry you
The Black Wednesday guide tells the full story.
Background: Black Wednesday, 16 September 1992: how sterling crashed out of the ERM
On 16 September 1992 the UK raised interest rates and spent billions defending the pound, then left the Exchange Rate Mechanism that evening. What happened, why, and what changed afterwards.
What happened on Black Wednesday?
On 16 September 1992, the UK government raised interest rates and the Bank of England bought pounds to keep sterling inside the Exchange Rate Mechanism. When that failed, the government suspended sterling's ERM membership that evening.
What interest rates did the UK set on Black Wednesday?
Rates were raised from 10% to 12%, and a further rise to 15% was announced. The increase to 15% never took effect after the UK left the ERM.
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