| Anyone who trades forex would have heard of | | | | buying the Sterling Pounds to keep it high. |
| George Soros, the man who traded against the | | | | But the final blow-off came as it gets closer to |
| Bank of England and won. This story has been | | | | the resistance area, George Soros and other |
| retold many times and is now stuff of legend. But | | | | speculators shorted even heavier, around $10 |
| now in 2007 when GBPUSD is over the 2.000 | | | | billion. Finally on that day at resistance, BoE |
| level from September 1992 once again, it is time | | | | announced they will no longer be part of the ERM |
| to recall this legendary forex event. Remember | | | | and will not intervene with the currency and will let |
| September 19, Black Wednesday in 92, the day | | | | it float freely. On that news, the hard drop in the |
| when the Bank of England withdrew and stopped | | | | Pound can be seen on the chart: |
| pumping money to keep the sterling pound strong. | | | | The following months, he and his investors made |
| Events leading up to Black Wednesday as it was | | | | one of the biggest and rarest winnings in Wall |
| called: BoE joined the European ERM (Exchange | | | | Street history. After this event, he was the man |
| Rate Mechanism), the predecessor to the EURO). | | | | who "broke the Bank of England." By judging the |
| This is when all the currencies locked at a fixed | | | | facts, Soros was lucky that BoE caved in before |
| price range with 6% leeway. If the price goes | | | | his $10 billion and other speculators run out as BoE |
| below or above this range, the Bank of England | | | | has a much deeper pocket than anyone individual. |
| must intervene and make sure the prices stay in | | | | This has to be remembered. Had BoE decided to |
| this range. It's easier to understand the event if | | | | continue intervening past the resistance, who |
| it's read in the chart on | | | | knows what may have happened but certainly |
| When it joined, the economies of the UK vs. the | | | | speculators who continue to short would have |
| rest of countries in the MRE were not in sync. | | | | been with extremely heavy losses. |
| The UK's Domestic Interest Rate was too low | | | | Using fundamentals (macro economic views) can |
| compared to the rest of the stronger nations like | | | | be advantageous in recognizing the imbalances in |
| Germany and France, which was much higher. | | | | the currency pairs but it must be a long term |
| This disparity was causing the fixed price range to | | | | trade and with a very big account to withstand |
| unbuckle. With Germany enjoying a fairly healthy | | | | the corrections and even the wrong timing of the |
| economy and UK entering it's economic recession, | | | | entries. |
| speculators saw this fixed price range in | | | | Any opinions, news, research, analyses, prices, or |
| disequilibrium, seeing the pound so high compared | | | | other information contained on these articles are |
| to the Deutsche Mark while it's inflation and | | | | provided as general market information and does |
| interest rising, they shorted in droves. | | | | not constitute investment advice. will not accept |
| BoE refused to lower interest rates due to | | | | liability or any loss or damage, including without |
| inflationary fears and cannot allow the GBP to be | | | | limitation to, any loss of profit, which may arise |
| devalued according to the ERM policy. The event | | | | directly or indirectly from use of or reliance on |
| leadig to the yellow shaded area showed that BoE | | | | such information. |