Most people when they hear about the pound going down, as it has gone down sharply recently, will either think that exports will be cheaper or going abroad on holiday will be more expensive.  Of course it also means something more fundamental.  A falling currency means that every citizen of that country is losing money.  It is the equivalent of lowering your wage when the business is in trouble, it may be better than any of the alternatives but it is nothing to celebrate (although the stock market at the moment will celebrate any news for any reason, until it doesn’t).

However it is possible to make money on the fall through either spread bets or contracts for difference.  This is done through shorting the pound, or going long on another currency such as the euro or the dollar.

A contract for difference means that an investor can essentially trade with someone who believes that the pound will be higher.  In this way when the pound goes down then the potential gain will grow.

On the other hand a spread bet can be another good way of betting on a falling pound.  This is done through looking at the current spread offered on the pound to dollar rate or the pound to euro rate in the next week, next month or next six months.  Spread bets are far better suited to more short term bets, for example looking at a rebound in the pounds’ value rather than a longer term bet looking at the fundamentals.

And if you think that the pound is currently undervalued and bound to go up?  Well you simply do exactly the opposite.