Thursday’s session began under the spell of risk-on, following yesterday’s inauguration of the 46th President of the United States. Joe Biden’s presidency promises the deployment of a massive fiscal stimulus package as well as greater harmony between the Treasury and the Fed, with the central bank’s monetary policy likely to remain dovish for the foreseeable future in order to help create the necessary conditions for a post-pandemic rebound in economic activity. As expected, the dollar is on the backfoot in relation to other major currencies. Meanwhile, amongst other currencies the pound is emerging as the standout winner of the current surge in risk appetite, reaching its highest for 2½ years during early Thursday trading. Freed from the shackles of Brexit, sterling’s performance now appears mainly driven by risk, with its performance shadowing that of other risk-related assets, in patterns that resemble those of the major stock indices.
