The pound was firmly on the front foot on Tuesday (12 July), climbing for a third consecutive day ahead of Theresa May's imminent appointment as Britain's new Prime Minister.

The current Home Secretary will become the UK's 76th Prime Minister late on Wednesday night, when she will officially replaced David Cameron and investors hope the soon-to-be-appointed premier will bring her some much-needed stability after the volatility sparked by the Brexit vote.

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The pound rose to its highest level against the dollar in a week – $1.3157 – and was trading up 1.10% at $1.3141 by mid-afternoon, while the UK currency was also on the front foot against the euro. Sterling gained for the fourth consecutive day against its European counterpart to €1.1852.

"Investors are welcoming the clarity on who will preside over the UK's renegotiations of its relationship with the EU although it could be some time before the formal withdrawal process begins," said Chris Saint, senior analyst at Hargreaves Lansdown currency service.

However, economists warned the relief could be short-lived, with some expecting the Bank of England to announce a cut to interest rates at its meeting on Thursday (14 July).

Elsewhere, the dollar slid 0.34% against the euro to $1.1096 per euro, although the greenback surged 1.13% against the yen to ¥103.96.

"A coordinated action from Japan's fiscal and monetary side is required to put an end for the yen's strength on the short run, and this is likely to happen in the weeks ahead, but it remains to be seen the exact size of the fiscal stimulus package to be announced," said FXTM chief market strategist Hussein Sayed.