Driven to the IMF, September–November 1976: ‘The Market’s Verdicts are Merciless and Effective’

Abstract

During the winter and spring of 1976, the value of the pound against the US dollar fell by approximately 12 per cent, from above $2 to around $1.77. Commenting on the selling pressures on sterling, the Bank of England acknowledged that ‘it is unlikely that events would have run the course they did had there not emerged a widespread view that sterling was overvalued’ (Bank of England Quarterly Bulletin September 1976, p. 308). But despite a 12 per cent depreciation, sterling’s weakness persisted into the autumn. In late October, the pound fell into the mid-$1.50s, and it was apparent that the roots of the Government’s confidence problem ran deep.

Financial Times editorial comment on the Government (28 September 1976, ‘Reality in Currency Markets,’ p. 18).