Last week hedge funds and asset managers flooded the market with bearish sterling options after Manchester mayor Andy Burnham secured a pathway that could eventually position him as a contender for the UK premiership, and could reshape risk calculations across portfolios.

The surge in short‑sterling positions reflects investors’ fear that a Burnham‑led government might pursue looser fiscal policies, undermining the pound’s recent recovery. Currency strategists noted that option premiums widened, indicating that market participants are willing to pay more for downside protection, a signal for equity investors watching UK markets.

By loading up on bearish options, fund managers aim to hedge exposure to any sudden devaluation, while also positioning for potential gains if the pound slides. The move adds pressure on the already volatile FX market, where dealers must balance liquidity needs against heightened demand for puts, as central banks monitor the fallout.