Hedge fund bets on a stronger pound reached their highest level in more than six years ahead of last week's UK election, driven by investor confidence in a Labour victory bringing stability to the country's politics and economy, according to a report by Bloomberg.

The report cites data from the Commodity Futures Trading Commission (CFTC) as showing that net long positions on the pound held by leveraged funds soared to their highest since April 2018 in the week leading up to 2 July. These speculative positions increased as the pound rallied to its strongest against the dollar in nearly a month and hovered close to a two-year high against the euro.

Sterling posted its best winning streak against the dollar in four years, gaining for seven consecutive days with Labour’s overwhelming majority bing seen as a signal for a period of political calm, which many market participants expect to be positive for UK assets.

The CFTC data also showed that short sterling positions held by asset managers shrank to their smallest in over a year.