Is the Pound Close to the Breaking Point?
While the pound’s recent declines may evoke memories of the 1992 "Black Wednesday" crisis, sterling's weakness does not reflect a general loss of confidence in UK assets. But the newly-announced plan to cap household energy prices may now lead to currency trouble by exposing the government’s balance sheet to huge potential losses.
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LONDON – Thirty years ago, on September 16, 1992, currency speculators forced the British Government to abandon the commitment of pound sterling to the European Exchange Rate Mechanism. In the days that followed “Black Wednesday,” sterling subsequently lost 15% of its value. By early 1993, it had lost almost one-third of its value.