Bank of England governor Mark Carney has pledged to extend his term in office by one year, defying pro-Brexit campaigners demanding his resignation.

Mr Carney said he would stay in post until the end of June 2019, but has opted against serving a full eight-year term.

The move comes after Prime Minister Theresa May said the Canadian banker was "absolutely" the right man for the job before her meeting with him today at Downing Street.

Mr Carney said he had taken the decision because he recognised "the importance to the country of continuity during the UK's Article 50 negotiations".

Read more: Theresa May: Mark Carney is absolutely the right man for Bank of England governor job

In a letter to Chancellor Philip Hammond, the governor said: "I clearly signalled my intention to serve for five years. As testified to Parliament, that intention was driven by personal, family considerations.

"In addition, I believed that five years would allow a reasonable timeframe to remodel the Bank to reflect its new, much broader responsibilities, and to complete the most important elements of the domestic financial reform agenda."

He added: "Since then, my personal circumstances have not changed but other circumstances clearly have, most notably the UK's decision to leave the European Union."

Mr Carney's decision means he will cover the full two-year period of Britain's Brexit negotiations, if Mrs May stands by her pledge to trigger Article 50 by the end of March next year.

Read more: Theresa May: Mark Carney is absolutely the right man for Bank of England governor job

Responding to the governor's letter, Mr Hammond said he was "very pleased" that Mr Carney had taken the decision to serve until the end of June 2019.

He added: "This will enable you to continue your highly effective leadership of the Bank through a critical period for the British economy as we negotiate our exit from the European Union.

"I am grateful for your contribution to both monetary and financial stability to date, and I look forward to your continuing contribution in the future."

The pound leapt against the US dollar and the euro following the announcement, with sterling up 0.3% against the US dollar at 1.223 and 0.2% against the euro at 1.114.

Read more: Theresa May: Mark Carney is absolutely the right man for Bank of England governor job

Mr Carney had faced mounting speculation that he was preparing to stand down early amid complaints that he went too far in warning of the economic dangers of leaving the EU in order to bolster Remain during the referendum campaign.

When he took up the post in 2013, it was agreed that Mr Carney would serve an initial five-year term with the option of another three years.

Asked earlier in the day whether Mrs May wanted him to stay on, the PM's official spokeswoman told a regular Westminster news briefing: "The Prime Minister has been clear in her support for the governor and the work he is doing for the country.

"It is clearly a decision for him but the PM would certainly be supportive of him going on beyond his five years."

Read more: Theresa May: Mark Carney is absolutely the right man for Bank of England governor job

Pressed on whether Mrs May saw the governor as "the right man for the job", the spokeswoman replied: "Absolutely."