The pound held near a five-month low against the euro on Thursday after Boris Johnson won by far the most support from Conservative lawmakers in the first round of the contest to replace Prime Minister Theresa May.
Johnson, the face of the official campaign to leave the European Union in the 2016 referendum, won the support of 114 Conservative lawmakers in the first round of the contest to replace May.
Currency markets were little moved despite the large gap between Johnson and Jeremy Hunt, the foreign minister who won 43 votes, coming a distant second, with markets waiting for the results of further rounds of voting.
“The pound has not really moved on the news as investors are waiting to see if there is a strong candidate that will emerge from subsequent rounds,” said Nikolay Markov, a senior economist at Pictet Asset Management.
The second round is due on June 18 with further ballots planned for June 19 and June 20 until there are just two candidates. A postal ballot of the wider Conservative Party membership will then be held to pick a leader.
Against the euro, the pound was holding near a five-month low of 89.31 pence hit earlier this week. Versus the dollar, the pound was broadly steady at $1.2681.
Broader market sentiment has also conclusively turned negative against the British pound in recent weeks with net speculative positions flipping towards a bearish position as concerns about Britain crashing out of the European Union without a deal has grown.
However with a U.S. Federal Reserve meeting due next week where policymakers might strike a dovish stance amid growing trade tensions, investors were wary of taking large negative bets on the pound.