The pound was up 0.5 per cent against the dollar at 1.33, and 0.3 per cent higher versus the euro at 1.13.
Mr Davis’s late-night resignation potentially plunges Prime Minister Theresa May into a fresh leadership crisis, but could also increase the chances of a so-called “soft Brexit”.
Connor Campbell, financial analyst at SpreadEx, said: “On the one hand it is odd the pound is in a decent mood, given that the ‘soft’ Brexit plan agreed at Chequers is arguably in doubt following Davis’s disappearing act.
“Yet his resignation does potentially make it easier to implement said ‘soft’ Brexit, dependent on how the next couple of hours and days pan out for PM May.”
In explaining his resignation, Mr Davis warned that the UK is giving “too much away, too easily” in the Brexit talks, claiming that the Government had gone further than it should have in the negotiations.
Mrs May must now replace the outgoing minister, with several candidates emerging as contenders including Environment Secretary Michael Gove, Foreign Secretary Boris Johnson and Cabinet Secretary David Lidington.
“There’s not much else for investors to grapple with this Monday, so the markets will be extra-sensitive to any more shifts in the UK political landscape,” Mr Campbell added.
Mr Davis was followed out of the Department for Exiting the EU by ally Steve Baker.