Sterling rose along with UK government bond yields on Tuesday as the early anointing of interior affairs minister Theresa May as prime minister fed into a generally improved global mood among financial investors.

The 1.2 per cent rise in the pound against the dollar put it on track for its biggest daily rise since Britain's vote to leave the European Union on June 23 drove sterling to 31-year lows.

The pound also gained half a per cent to a one-week high of 84.57 pence per euro, extending gains on Monday after the withdrawal of leading Brexit campaigner Andrea Leadsom cleared the way for May's formal appointment this week.

“Clarity on the UK's leadership was another factor boosting investors' appetite,” analysts from retail brokerage FXTM said in a morning note.

“However, the big question remains as to when Article 50 is going to be triggered, and how investors are going to react to UK's official departure from the EU. Meaning that investors shouldn't get over excited.”

UK 10-year gilt yields rose 4 basis points to 0.80 per cent . The FTSE 100 stock index was down 0.1 per cent after hitting an 11-month high at the opening.

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