Traders wager £6bn in opposition to pound in snub to Chancellor

Traders have ramped up their bets against the pound to their highest level in six years, The Mail on Sunday can reveal.

In a damning verdict on Rachel Reeves’ recent Budget, speculators have voted with their wallets, taking out almost £6 billion of wagers against sterling.

Sentiment against the currency – which is seen as a proxy for the British economy – is now even more negative among investors than it was before the mini-Budget during the Liz Truss era.

Her package of unfunded tax cuts spooked markets and led to a run on the pound, taking it within a whisker of parity with the dollar in 2022.

Sterling has since recovered to $1.34 helped by higher-for-longer interest rates. But the scale of bets piling up against the currency suggests traders think it will be on the slide again soon.

‘Shorting’ sterling is a risky investment strategy involving betting its value will fall against another currency such as the dollar, often using borrowed money.

Profits are made if the pound weakens, but losses are racked up if the bet goes the other way.

The latest data from the Commodity Futures Trading Commission shows there were more than 93,000 net bets against the currency, meaning traders think the pound’s value will fall.

The US regulator tracks how traders are positioned in what are known as futures contracts.

The number of ‘sell’ contracts against sterling has risen rapidly since the summer, when speculation over Reeves’ tax-raising Budget began in earnest.

The Bank of England last week cut interest rates for the sixth time since summer 2024 – from 4 to 3.75 per cent – making the pound less attractive for investors to hold as growth grinds to a halt. Experts expect two more rate cuts next year, further weakening sterling’s appeal.

Investors also take a dim view of the state of the public finances and more political upheaval if Keir Starmer is ousted after May’s local elections.

‘Added to lower rates in the UK are concerns about its fiscal position, slow growth and productivity and the possibility that politics could re-enter the fray in the form of a leadership challenge,’ said Jane Foley at investment bank Rabobank. The Bank of England is likely to be one of just a few big central banks cutting interest rates next year, she added, making other currencies more appealing.

‘Asset managers are running some of their shortest sterling positions in over a decade,’ said Chris Turner at investment bank ING. The number of ‘sell’ bets is now at its highest level since the crisis over Britain’s exit from the European Union in 2019.

A weaker pound helps exporters, but it also increases the price of imports, fuelling inflation and potentially limiting the scope for further rate cuts.

Reeves has clobbered the economy with an extra £66 billion of taxes since becoming Chancellor last year, including a £25 billion raid on employer National Insurance Contributions. A big rise in the minimum wage, extending a stealth tax on pay rises and endless speculation ahead of her latest Budget have also hammered business confidence.

Unemployment now stands at 5.1 per cent, a five-year high. And while inflation, as measured by the Consumer Prices Index, fell from 3.6 per cent in October to 3.2 per cent in November, it is still well above the Bank’s 2 per cent target.

The Government is also set to borrow more to fund welfare giveaways. Debt is set to soar from £2.8 trillion this year to £3.5 trillion in 2031, according to the Office for Budget Responsibility. The official forecaster said the interest bill on that borrowing over those six years would also climb to £750 billion in total – enough to fund almost four years of spending on the NHS and social care.