The pound is the currency of the United Kingdom, and it is also the name of the physical object that represents one pound. It is used to make international transactions, and it is often referenced in the news when discussing global economic or political events.
Why is British money called a pound?
Traders can make money by shorting the pound meaning by betting against the currency and hoping it will decrease in value. In essence, they are borrowing pounds from their broker to sell them in the market, and if the pound does decrease in value relative to other currencies such as the US Dollar, then traders will pocket the difference as a profit.
A number of different factors can cause the pound to increase or decrease in value, including interest rates, inflation, GDP growth and other key economic indicators. For example, if the Bank of England increases interest rates, this can attract foreign capital looking for higher returns and therefore potentially raise the Pound’s value. On the other hand, high inflation in the UK can reduce the Pound’s value as it will be more expensive for people to purchase goods and services.
There are a variety of ways to short the pound, including through spread betting and Contracts for Difference (CFDs). While both can be highly profitable and involve low risk, it is essential to understand the risks involved and ensure you have a solid trading strategy in place. For more information, read our articles on how to trade forex, or watch YouTube videos that explain the process in detail.