George Soros’s currency speculation helped force the United Kingdom to leave the European Exchange Rate Mechanism on Black Wednesday in 1992.
The United Kingdom had joined the ERM, which required the pound to remain within a specified range against other European currencies. Economic pressure, high interest rates, and doubts about the pound’s sustainable exchange rate made the arrangement increasingly difficult to defend.
Soros’s Quantum Fund built a large short position against sterling. On September 16, 1992, the British government raised interest rates and spent reserves attempting to support the pound, but the pressure continued. Britain suspended the pound’s ERM membership later that day.
Soros became famous for reportedly making about $1 billion from the trade, earning the label “the man who broke the Bank of England.” Black Wednesday was primarily a currency crisis rather than a conventional equity-market crash, but it produced major financial-market losses and political consequences.