The dream continues

Sustainable highs?

The BBC website reports that "Legal highs ban comes into force across the UK". Remain campaigners call it a triumph for EU commonsense; Leavers claim it would have happened years ago if Britain had been outside the EU. Either way, they're now illegal highs. Could the same be said for sterling?

After another good run on Wednesday sterling is at, or approaching, 2016 highs against everything except the Japanese yen. It was beaten about the head for a couple of months after the announcement of the EU in/out referendum in late February. Since then the pound has been on the advance as the odds (currently 2/11 on) have trended towards a vote to Remain. Just as the original panic selling was somewhat overdone, so sterling's recent bull run smacks of premature euphoria. Time will tell, but be prepared for a setback if a black swan appears and the mood changes.

That said, there can be no argument that the pound is not doing well at the moment. It is up by an average of 0.5% on the day, 0.6% on the week and 4.6% on the month against the other dozen most actively-traded currencies. Over the last 24 hours its only loss has been to the Canadian dollar, where it is down by two thirds of a cent. As before, there were no sterling-specific data to account for its rise: the buying was driven solely by sentiment, in this case a pro-Remain warning by Standard and Poor's that Brexit would "jeopardise the British pound sterling's position".

Commonwealth cousins

Sterling apart, the strongest and weakest performers over the last 24 hours were the Canadian and New Zealand dollars. The Kiwi was hurt by the threat of lower milk prices while the Bank of Canada gave the Loonie a leg up.

The Bank of Canada had been expected to keep its benchmark interest rate stead at 0.5% yesterday and that is exactly what it did. However, the BoC statement was upbeat about the economy, banishing thoughts of a possible future rate cut.

The NZ dollar's problem was a milk price forecast by Fonterra, which came in lower than expected. Fonterra, a famers' cooperative, accounts for nearly a third of global dairy exports.

GDP and durable goods

Spain and Britain both release revised data for first quarter growth this morning. Neither is likely to affect exchange rates. After lunch the US Census Bureau publishes the figures for durable goods orders. There are the usual speeches by Federal Reserve worthies.

James Bullard and Jerome Powell will almost certainly echo what their colleague Patrick Harker said yesterday: US interest rates are going up. Their reminders should by now be redundant. More important to the US dollar will be durable goods orders, which can be guaranteed not to have risen by 0.4-0.5% in April as analysts predict.

The revision to Britain's gross domestic product in Q1 should confirm a 0.4% expansion. Nobody will care: it's all about Brexit.