The pound has rallied against the dollar after Theresa May won a crucial vote of confidence in her leadership, thwarting plans by Tory Brexiteers to remove her as prime minister.

It jumped to $1.2672 as it emerged that enough Conservative MPs had supported their leader to see off a leadership challenge on Wednesday evening, before falling to $1.2605, still 1 per cent up on the day.

It had slumped to $1.2562 when markets closed on Monday, its lowest level since April 2017, after Ms May announced a parliamentary vote on her Brexit deal would be delayed.

However, the pound remains low against the dollar compared to recent months, when anything between $1.30 to $1.27 has been normal.

The pound also closed on Wednesday against the euro at €1.1110, up from €1.1059 at the beginning of the week, but low compared to the roughly €1.15 seen during November.

Ms May won the confidence vote by 200 votes to 117 – with just under two thirds of Tory MPs deciding to back her leadership.

The secret ballot had been called earlier on Wednesday after Sir Graham Brady, the chairman of the 1922 Committee of Conservative backbenchers, announced he had received the 48 letters from MPs needed to trigger a vote.