Traders have wagered a £2bn bet on a plunge in the pound after the Bank of England failed to deliver on a widely expected interest rate rise earlier this month.

Shorts predicting a pound slump have soared to their highest level since June 2020, weekly trading data suggests. It marks a sharp reversal from just a few weeks ago, when bets for the pound were at a near four-month high as investors geared up for a string of rate rises to curb the surge in inflation.

However, the Bank failed to follow through on its hawkish signals and held rates at a record low of 0.1pc at its November meeting.

The Bank’s rate-setters were criticised for misleading markets as they held fire to wait for the first jobs market data following the end of the furlough scheme. Sterling slumped 1.2pc against the dollar on the day of the Bank’s meeting.

Francesco Pesole, currency strategist at ING, said: “Despite the tendency to show very wide swings, it seems to be signalling some worsening in market sentiment on the currency.

“There is a chance that part of the market is growing increasingly concerned about a resurgence in Brexit risk.”

Markets now expect the Bank to lift borrowing costs for households and business at its December meeting just nine days before Christmas. 

Early signs from the labour market suggest that the end of the Chancellor’s jobs support passed without causing a major surge in unemployment, amid record vacancies. Investors are still bracing for as many as four rate hikes in the next 12 months to stamp out rocketing prices.