Donald J713_ Walker

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What was the 1992 Black Wednesday crisis and its impact on forex?

Black Wednesday refers to September 16, 1992, when the British pound collapsed after the UK failed to keep GBP within the European Exchange Rate Mechanism (ERM). Speculators, led by George Soros, bet against GBP, forcing the Bank of England to spend billions defending the currency. Despite interventions and interest rate hikes, the pound crashed, and the UK withdrew from the ERM. Impact: huge losses for the government, reputational damage for policymakers, and a legendary $1 billion profit for Soros. Lessons for forex traders: central banks are powerful but not invincible; fundamentals like misaligned exchange rates eventually win. For retail traders, Black Wednesday illustrates the danger of fighting markets and the potential of aligning with macro fundamentals.