Pound sterling spikes briefly as Boris Johnson pulls out of leadership race

The pound spiked briefly against the dollar after the announcement before it lost those gains

The pound spiked against the dollar briefly after Boris Johnson unexpectedly announced he will not stand for Conservative leader.

The pound, which was at $1.3435 just before noon, rose 0.42 per cent to $1.3492 after the former Mayor of London said he won’t run to succeed David Cameron as UK Prime Minister and Conservative Party leader.

Not long after the announcement it lost those gains, to trade at $1.3433, as markets grappled with the implications of the news.

“Sterling will take the positive out of this, which is we now have a Conservative Party that will not be splitting at the seams,” Daragh Maher, New-York-based head of US currency strategy at HSBC, told Bloomberg.

ETX Capital said there was a “short Boris bounce” but that markets were a lot more concerned about what Mark Carney, the governor of the Bank of England would announce later today.

In a surprise announcement on Thursday, Boris Johnson said that he will support the next Tory leader but ruled himself out of the leadership race.

“I must tell you, my friends, you who have waited faithfully for the punch line of this speech, that having consulted colleagues and in view of the circumstances in parliament I have concluded that person cannot be me,“ he said.

His departure leaves Home Secretary Theresa May as the favourite to win the race. She launched her leadership campaign on Thursday morning.

The pound had dipped to $1.3231 on Thursday night - the lowest since 1985 - as the referendum result came into focus and traders sold sterling.

It had slipped further to $1.3218 by Monday, a new 31-year low against the dollar, as a result of investor anxiety over the economic implications of Brexit.

But financial markets have bounced back over the past two days despite the remaining uncertainties over the economic implications of a Brexit.