Pound gains as markets calmed by Boris Johnson quitting race to be prime minister

Sterling stood at $1.136 against the dollar on Monday morning

The pound has gained on the dollar and markets stabilised following news that Boris Johnson will not run in the Tory leadership race.

Sterling stood at $1.136 against the dollar on Monday morning. It had risen to $1.139 at around 9pm on Sunday evening after news broke that Mr Johnson had decided not to try to become prime minister.

It then dipped slightly before rising again on Monday morning.

The FTSE 100 started the day with a 0. 5 per cent rise, pushing it above the 7,000-point mark for the first time in a week. And the gilt market cooled, making it cheaper for the government to borrow money.

Last week, the pound fell as low as $1.11 on Friday amid continued political uncertainty.

It is now appears likely that former chancellor Rishi Sunak will win the Tory leadership race. Mr Sunak is currently the only candidate to be backed by more than 100 Conservative MPs, the threshold required to run for leadership.

Mr Johnson dropped out of the race, saying that it would not be “the right thing to do”.

He claimed to have support from 100 MPs but suggested he would fail to unite the Tory party as prime minister.

“You can’t govern effectively unless you have a united party in Parliament,” he said.

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Following the news, there was also a big fall in gilt yields on Monday morning as markets opened.

The implied interest rate on 10 year UK government bonds was down from 4.1 per cent to 3.8 per cent. Lower gilt yields means that it becomes cheaper to service government debt.

Penny Mordaunt is now the only other candidate in the running to become Tory leader but she has not yet reached the required 100 MPs needed to have her name on the ballot.

Private-equity investor Guy Hands, speaking on Radio 4’s Today programme on Monday morning, said that the UK economy is “frankly doomed” unless the government figures out a way to make a success of Brexit.

Asked if the Conservative party was fit to run the country and attract investment, Mr Hands responded: “No, to be quite blunt. It’s got to move on from fighting it’s own internal wars and actually focus on what needs to be done in the economy.”

Penny Mordaunt is still confident she could get the backing of 100 MPs on Monday (AFP via Getty Images)

Mr Hands, who has been a long-time supporter of the Tory party, said they had to admit “some of the mistakes they’ve made in the last six years”, saying they had “put this country on a path to be the sick man of Europe.”

He said that the Tory right’s low-tax libertarian vision of Brexit, as tried out by Liz Truss, was not a success and was also not what the British people wanted.

“Once you accept that you can’t actually do that then the Brexit that was done is completely hopeless and will only drive Britain into a disastrous economic state,” Mr Hands, founder of Terra Firma, said.

He said the Conservatives needed to renegotiate Brexit or end up with an economy that was “frankly doomed” and would need a bail out from the IMF.