The pound gained ground on Monday (11 July), after Andrea Leadsom pulled out of the race to become the new leader of the Conservative Party, paving the way for Home Secretary Theresa May to succeed David Cameron as Prime Minister.
The Conservative Party confirmed they will not be holding another contest, with Graham Brady, chairman of the Conservative's 1922 Committee, indicating May will formally become the new leader once the party board is consulted.
The sterling briefly rose above $1.30, before settling at $1.2961 by early afternoon on Monday (11 July), as investors took May's imminent appointment as a step towards some much-needed post-Brexit stability.
"Markets will be hopeful that the prospect of Theresa May becoming Prime Minister will soon bring some clarity to the UK political landscape as well as a more conciliatory approach towards Europe," said Chris Saint, senior analyst at Hargreaves Lansdown currency service.
Earlier in the day, the pound had fallen as low as $1.2865, just above last week's 31-year low, as markets braced themselves for a rate cut by the Bank of England, which could be confirmed as early as Thursday (14 July).
However, following the latest developments within the Conservative Party, the UK currency was also trading higher against the euro, with the latter shedding 0.3% against the pound to 85.10p.
The euro was also on the back foot against the dollar, losing 0.06% against the greenback to $1.1044, with the latter surging almost 2% against the yen to to ¥102.53. Ilya Spivak, currency strategist at DailyFX, said the decline was due to the landslide win Japanese Prime Minister Shinzo Abe's ruling coalition enjoyed on Sunday.
"The anti-risk Japanese yen traded lower against a backdrop of improving sentiment as Asian bourses had their opportunity to react to the upbeat result," he said. "Traders cheered signs of strength in the world's largest economy on hopes that it will counter weakness in Europe following the UK Brexit referendum."