Boris Johnson, the front-runner in the contest to replace Prime Minister Theresa May, has said he wants to Britain to quit the EU at the end of October even if that means leaving without a deal.

The process of replacing May starts on Thursday, when Britain's ruling Conservatives vote to eliminate at least one of the 10 candidates for the leadership.

Political uncertainty and parliamentary feuding have unnerved investors, who are avoiding sterling until a new British leader is in place.

"I can't see sterling getting any help. Negative sentiment is building, and a move towards 91 pence per euro isn't at all out of the question as 'no-deal' fears grow," said Societe Generale strategist Kit Juckes.

The pound was down 0.2pc at $1.2662, close to a one-week low of $1.2653 hit on Monday. It was down 0.2pc against the euro at 89.2 pence.

Conservative lawmakers will cast their votes in the first round of the leadership conteset between 0900 GMT and 1100 GMT. Any candidate with 16 votes or fewer will be eliminated.

A new prime minister should be chosen by the end of July.

Johnson led the official campaign to leave the EU in the 2016, referendum.

Betting markets give him a 67pc probability of winning the top job.