Investors have been building up bets against the pound, as conviction grows that the Bank of England will start cutting interest rates by the summer, ahead of its US counterpart.
Currency speculators’ wagers on a fall in sterling have reached a 16-month high, data from the US Commodity Futures Trading Commission shows. Meanwhile, asset managers have turned the most bearish on the UK currency since March last year, according to State Street, one of the world’s largest custodian banks.
The shift in positioning, driven by falling UK inflation and weak economic data, has helped push the pound down 1.5 per cent against the dollar this year. Investors now expect the BoE, which announces its latest rate decision on Thursday, to cut earlier and faster than the Federal Reserve.