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Speculative investors have boosted 'long' exposure to the British Pound by a further 58,063 contracts, according to positioning data from the CFTC.

The latest weekly snapshot of FX investor positioning revealed the net GBP long position rose to 58,063 contracts, its highest since November 2007, in the week ended July 11.

This "equates to a $4.7 billion bet on a stronger pound," according to Robert Howard, a foreign exchange market analyst at Reuters.

"Sterling is currently all the rage among dedicated followers of foreign exchange fashion, less than a year after the disastrously received "autumn collection by Trussonomics" sent it to a historic low," he says.

The Pound-Dollar exchange rate last week reached its highest level in 14 months after peaking at 1.31, the Pound-Euro exchange rate peaked at 1.1759.

Both currency pairs have retraced somewhat with investors displaying caution ahead of the midweek release of UK inflation data, a pivotal reading that should determine the likelihood of another 50 basis point rate hike at the Bank of England in August.

"This was the largest, single currency positioning shift over the week. The improvement in GBP sentiment takes bullish positioning among non-commercial traders to a new high," says Shaun Osborne, Chief FX Strategist at Scotiabank.

In mid-June, before the Bank of England unveiled the first of its "summer season" rate rises, the net GBP long stood at a relatively modest 6,735 contracts. The bet has steadily grown since the Bank of England adopted a more assertive approach in fighting inflation by dropping 'dovish' guidance and surprising with a 50 basis point hike in June.

"Further upside data surprises have prompted a sharp re-pricing in GBP rates, as markets contemplate even more restrictive policy settings as necessary; 2y gilt yields have risen ~110bp since the beginning of June. The GBP has risen in response," says Parisha Saimbi, G10 FX Strategist at BNP Paribas in London.

Should UK inflation print in line with expectations this week (8.1% year-on-year), or exceed expectations, UK bond yields will likely firm as investors raise bets for a 50bp hike in August, in turn offering GBP support.

"Sterling bulls hope the second hike offering from the BoE's summer collection, due on Aug. 3, is as well-received by the FX market as the first," says Howard.

The rise in the Pound-Dollar exchange rate was meanwhile largely a function of Sterling outperformance in a widespread USD selloff linked to two key U.S. inflation readings that revealed the U.S. is seeing disinflationary pressures take hold.

This lowers the odds of future Federal Reserve rate hikes while also raising the odds of cuts, in turn weighing on U.S. bond yields and boosting equity markets which are textbook negatives for the USD.