1992 pound short
Soros had been building a huge position in pounds sterling for months leading up to September 1992. Soros had recognized the unfavorable position of the United Kingdom in the European Exchange Rate Mechanism. For Soros, the rate at which the United Kingdom was brought into the European Exchange Rate Mechanism was too high, their inflation was also much too high (triple the German rate), and British interest rates were hurting their asset prices.
On September 16, 1992, Black Wednesday, Soros's fund sold short more than $10 billion in pounds, profiting from the UK government's reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or float its currency.
Finally, the UK withdrew from the European Exchange Rate Mechanism, devaluing the pound. Soros's profit on the bet was estimated at over $1 billion. He was dubbed "the man who broke the Bank of England." The estimated cost of Black Wednesday to the UK Treasury was £3.4 billion.
On October 26, 1992, The Times quoted Soros as saying: "Our total position by Black Wednesday had to be worth almost $10 billion. We planned to sell more than that. In fact, when Norman Lamont said just before the devaluation that he would borrow nearly $15 billion to defend sterling, we were amused because that was about how much we wanted to sell." Stanley Druckenmiller, who traded under Soros, originally saw the weakness in the pound and stated: "[Soros's] contribution was pushing him to take a gigantic position." #georgesoros #bankofengland #blackwednesday #macroeconomics #normanlamont #stanleydruckenmiller
#thetimes #uk #forex #fx #forextrader #forextrading #forexmarket #fxtrader #fxtrading #foreignexchange #trader #trade #trading #hedgefund #hedgefundmanager