George Soros’s currency speculation helped force the pound out of the European Exchange Rate Mechanism during Black Wednesday in 1992. Soros’s Quantum Fund built a large short position against sterling, betting that Britain would be unable to maintain its exchange-rate commitment.
The pound had joined the ERM in 1990, which required it to remain within a defined band against other European currencies. Britain faced recession, high interest rates, and pressure on sterling. The government raised interest rates and attempted other measures to defend the currency, but market pressure continued.
On September 16, 1992, Britain suspended the pound’s ERM membership and allowed it to float. The day became known as Black Wednesday. Soros was widely reported to have made about $1 billion, although estimates differ by source and the trade was only one part of a much broader market challenge.
The episode is often described as a stock-market crash, but it was primarily a currency and monetary-policy crisis. Its effects nevertheless reached banks, investors, interest rates, and European financial markets.