September 16, 1992, became known as Black Wednesday when the pound sterling left the European Exchange Rate Mechanism.
The United Kingdom had joined the ERM in 1990 and promised to keep the pound within a specified exchange-rate band. In 1992, investors doubted that Britain could maintain the pound’s value while facing recession and high interest rates.
The government raised interest rates and spent billions of pounds buying sterling, but market pressure continued. Britain suspended the pound’s ERM membership on September 16, after which sterling fell and interest rates were reduced.
George Soros became famous for profiting from a large short position in sterling, although many other traders also bet against the currency. Black Wednesday damaged the government’s economic credibility but later allowed Britain to pursue more flexible monetary policy.