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.

Brexit reactions – in pictures Show all 10 1 /10 Brexit reactions – in pictures Brexit reactions – in pictures Supporters of the Stronger In campaign look at their phones after hearing results in the EU referendum at London's Royal Festival Hall AP Brexit reactions – in pictures Leave supporters cheer results at a Leave.eu party after polling stations closed in the Referendum on the European Union in London Reuters Brexit reactions – in pictures Mr Cameron announces his resignation to supporters Getty Brexit reactions – in pictures Donald Tusk proposes that the 27 remaining EU member states ‘start a wider reflection on the future of our union’ Getty Brexit reactions – in pictures Ukip leader Nigel Farage greets his supporters on College Green in Westminster, after Britain voted to leave the European Union PA Brexit reactions – in pictures Supporters of the Stronger In Campaign react as referendum results are announced today Getty Brexit reactions – in pictures Boris Johnson leaves his home today to discover a crowd of waiting journalists and police officers Getty Brexit reactions – in pictures Leave EU supporters celebrate as they watch the British EU Referendum results being televised at Millbank Tower in London Rex Brexit reactions – in pictures Supporters of the Stronger In Campaign react as results of the EU referendum are announced at the Royal Festival Hall Reuters Brexit reactions – in pictures Supporters of the Stronger In campaign react after hearing results in the EU referendum at London's Royal Festival Hall PA

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.