Pound up after Liz Truss quits and Keir Starmer calls for general election

The pound rose 0.7% in noon trade to $1.13 after Truss resigned as prime minister of the UK. Meanwhile, Labour leader Sir Keir Starmer demanded a general election after Truss stepped down.

Meanwhile, UK gilts extended gains, with the yield on the 10-year bond falling to 3.76%. Bond prices fall when yields rise. The yield on the 30-year debt dropped under 3.8% from a high of 4.15%.

Speaking from a lectern in Downing Street, she said she told the King she was resigning as the leader of the Conservative Party as she recognised she "cannot deliver the mandate" which Tory members gave her.

Truss stepped down after a tumultuous 44 days in office during which she lost the confidence of Conservative MPs, the public and oversaw economic turbulence.

She is set to become the shortest serving Prime Minister in history after she battled an open revolt from Conservatives demanding her departure.

Around of 12 Conservative MPs have called on her to resign, including Miriam Cates who is a member of the 1922 committee executive, who said that "it seems untenable . . . and yes, I do think it’s time for the prime minister to go." Truss also met with Sir Graham Brady, chair of the 1922 committee, on Thursday.

Read more: Bank of England wasn't fully briefed before Liz Truss's disastrous mini-budget, Cunliffe reveals

The PM's and then-chancellor Kwasi Kwarteng’s mini-budget on 23 September, triggered turmoil in financial markets and required an emergency intervention by the Bank to support government bonds.

Since then a series of U-turns on policies, which had been a key part of Truss’s appeal to party members, and Kwarteng's sacking and subsequent replacement by Jeremy Hunt, who junked almost all of the tax cuts, has been touted as 'the straw that broke the camel's back'.

On Wednesday, home secretary Suella Braverman delivered the final blow to Truss's premiership, after she resigned over a breach of ministerial rules relating to sending an official document from her personal email.

Read more: FTSE 100 jumps as Liz Truss resigns as UK prime minister

But her resignation letter, posted on Twitter, suggested the real reason for her departure was a clash with Truss over immigration policy, which she said raised "serious concerns" about the government and its "commitment to honouring manifesto commitments, such as reducing overall migration numbers".

It comes as the BoE's deputy governor Ben Broadbent said interest rates might not need to rise as much as the market expects.

Broadbent said that while the "justification for tighter policy is clear" in the face of soaring inflation, demand will slow to some extent anyway due to higher prices. "Whether official interest rates have to rise by quite as much as currently priced in financial markets remains to be seen," he added.

The comments come after UK inflation surged back to a 40-year high of 10.1% in September on the back of soaring food and fuel costs.

Read more: FTSE 100 falls as economic and political concerns temper sentiment

However, despite gains, economists say sterling's "outlook remains precarious".

Jonas Goltermann, senior markets economist, said: "While the UK government’s apparent U-turn on fiscal policy offers some hope of relief for sterling, we think the outlook remains precarious.

We continue to expect that sterling will lose further ground against the US dollar in the near term.

But while the risks remain skewed to the downside, we don’t anticipate a major, broad-based sterling depreciation on the scale of those in 2016, 2008, and 1992.