Dhara Ranasinghe’s perspective on the future.

We can take a breather from worrying about how quickly the Fed will slam the brakes on inflation control and instead talk about sterling.

It is one of the top performing major currencies during the first few days of 2022. Due to Omicron COVID signs abating, and the expectation that UK interest rates may rise once again in February, it’s near $1.37.

According to data released Friday, Britain’s economy experienced a 0.9% increase in November.

However, the rallies are drawing to a close and there is growing political uncertainty, so it remains uncertain how long they will continue. The leadership of Prime Minister Boris Johnson is at risk as some members of his party are calling for him to quit. Wednesday’s revelation that Johnson attended drinks with employees during the May 2020 lockdown has put pressure on Johnson. On Friday, new revelations were made about Downing Street parties.

Sterling bulls are warned by the volume of bank notes reminding clients this week of possible Johnson leadership challenges.

The Fed announced Thursday that Governor Lael Brainard, the Fed’s most senior central banker, indicated that the Fed will raise interest rates in March to counter inflation.

Asian shares fell 1.3% due to rate hike unease. European shares could open lower, but U.S. stock options are rising.

They are slightly higher at 1.733%, and near the two-month lows — an indication that tighter policies have already been well priced in the greenback.

Next up is the release of December U.S. retail sales figures later in today.

China Evergrande shares gained ground after the developer with the highest debt in the world was granted crucial approval by onshore bondholders. This allowed them to defer payments on one of their bonds, as developers try to avoid default.

The following are key developments which should give more direction to the markets Friday

China recorded a record-breaking trade surplus in December, and 2021.

Germany’s 2021 GDP

Stefan Ingves is the Riksbank Governor

– ECB: President Christine Lagarde

Fed: President Patrick Harker, Philadelphia. President John Williams, New York

– US retail sales Dec/industrial production/inventories/University of Michigan survey

– US earnings: BlackRock, JPM Wells Fargo (NYSE:), Citi Graphic: Sterling off to a solid start to 2022, https://fingfx.thomsonreuters.com/gfx/mkt/xmvjobemgpr/theme1301.PNG