GBP/USD was pushed lower by fears the UK’s economic recovery is in trouble, with borrowing costs surging and inflation rising. This was exacerbated by the government’s questionable responses on fiscal and monetary policy. How to short the pound.

To short a currency means to sell it, betting the price will fall. Traders can make this trade on forex markets (where currencies are traded). To go short, traders need to open a trading account and choose a pound-related currency pair. They then need to ‘buy’ the counter currency, such as USD or EUR, and’sell’ the pound.

How to Short the Pound: Strategies for Forex Traders

How does it work? Traders take advantage of the correlation between different currencies to create a profit. For example, the AUD and NZD tend to be positively correlated with GBP/USD, so you could use this to your advantage when shorting the pound.

The main factor that influences the value of a currency is interest rates. Countries with higher interest rates – or expected to have high interest rates – attract businesses and speculators, which then buy that country’s currency. Countries with low interest rates, on the other hand, have a hard time attracting investors and businesses, so their currencies are likely to fall in value against other major currencies.

There are a few other factors that can influence the price of a currency, such as geopolitics and investor confidence. The pound is particularly sensitive to political events in both the UK and the US. During times of global uncertainty, the pound can become volatile and is often sold off. In fact, during the financial crisis of 2008, the pound dropped 25% against the USD.