Traders are ramping up bets that the pound will fall in the coming months amid a growing conviction that the Bank of England will cut interest rates before the US.

The level of wagers placed by investors against sterling has hit a 16-month high, according to data from the US Commodity Futures Trading Commission, first reported by the Financial Times.

Meanwhile, asset managers have not been more pessimistic about the future strength of the pound since March last year, according to State Street, one of the world’s largest custodian banks.

The pound has fallen 1.5pc against the dollar this year, although that has still made it the strongest performer among the G10 group of major currencies.

However, traders expect the Bank of England, which announces its next interest rate decision tomorrow, will cut borrowing costs earlier and faster than the US Federal Reserve.

Derivatives trades indicate that a first interest rate cut will happen in Britain by September at the latest, while money markets suggest it could be as late as November in America.

On Tuesday, Minneapolis Fed President Neel Kashkari, who does not have a vote on rates this year, suggested the Federal Reserve may need to forgo reductions in borrowing costs this year due to stubborn inflation.

Read the latest updates below.