The Pound to Canadian Dollar exchange rate trades at 1.6504 at the start of the new week having edged up on the previous week's close at 1.6498.

Foreign exchange markets are flat this morning and so far there is little evidence that the terrorist event in Quebec - which is grabbing global headlines on Monday - has had an impact on the CAD strip.

Pound Sterling is seen pausing its steep short-term uptrend against the Canadian Dollar and our immediate expectation is for this scenario to extend.

The exchange rate may be forming a triangle but it’s too early to say yet as the consolidation is still only composed of three waves.

Given the strong uptrend before the consolidation, the odds are in favour of a continuation of that trend after the consolidation has completed.

Nevertheless, we would seek confirmation of a bullish extension from a break above 1.6730, which would clear 1.6631 highs and the monthly pivot (PP) at 1.6681.

This is a resistance level which often blocks price rises as traders use it to fade the trend - a break above would help confirm a continuation higher to the next target at 1.6800.

Keeping an Eye on the US President this Week

The Canadian Dollar has found supported by news from Donald Trump’s office giving the go-ahead for the construction of the Keystone/Dakota oil pipeline.

Fears that the Canadian economy might suffer inordinately from Trump’s protectionist trade agenda surrounding NAFTA have eased meanwhile.

Trump’s rhetoric against Canada has been relatively mild partly because Canada and the US have a much more balanced trade relationship with each other than compared to the Mexico-US relationship.

Canada exports 1.2x to the US compared to what it imports.

Indeed there appears to be an entente cordiale between the two nations in regards to the trade agenda.

Canadian PM Trudeau recently revealed that: "the administration has made it very clear…that they are not overly preoccupied with Canada in terms of much of their protectionism and much of the rhetoric they’ve put out.”

“They actually have emphasized to us that the trade relationship with Canada is a good one, is a balanced one, is one that they value and one that they understand is good for not just the northern states but many states across the United States."

Trump’s talk has been toughest against Mexico which has a higher surplus with the US (1.4x) whilst he may also have Japan and Germany in his sights, which have much higher surpluses at 1.9x and 2.5x respectively.

Nevertheless, we would suggest that an eye is kept on Trump moving forward as he has a penchant for springing surprises and any further flareups on NAFTA might not be good for CAD.

Canadian Data in the Coming Week

From a pure data perspective, the big release in the week ahead is Canadian Real GDP which is forecast to upend Bank of Canada (BOC) estimates and come out at 2.0% in Q4.

“Real GDP is forecast to rebound firmly with goods-producing industries leading the advance while the services side should make a more modest contribution. This would leave Q4 GDP tracking near 2% and above BoC estimates, indicating that the near-term outlook is intact,” comment TD Securities in a note seen by PSL.

With Oil forecast to rise to 62 dollars a barrel in Q2 by Barclays and less trenchant trade talk with the US, the outlook for Canada and therefore the loonie may be improving.

Pound May See Upside on Super-Thursday

The Pound could be the currency to supply the fireworks this week, with Thursday highlighted due to the BOE meeting and the release of the Quarterly Inflation Report.

There is potential for the Sterling to strengthen as recent above-forecast growth means the BOE will probably revise up their growth forecasts.

Of interest however will be whether forecasts to the inflation profile are moved higher.

The strong consumption and stubbornly low unemployment means the BOE has more room to tackle rising inflation caused by the weak Pound and rising oil price.

This, in turn, could lead to heightened expectations of a BOE rate hike and a change of stance from neutral to more hawkish, which would propel Sterling higher.

“We like buying pounds into the Quarterly Inflation Report, especially as it dips toward 1.25 with a target of 1.27/1.28,” says BK Asset Management’s Kathy Lien.

However, Sterling remains a political currency and we expect major moves to be framed by the Brexit story.

“It's strange to see GBP performing so well when the path towards a 'hard' Brexit remains firmly on the table; strategically, we remain bearish on GBP/USD and look for fresh catalysts (namely dollar strength) to see a short-term move back towards the 1.24 level,” says ING’s FX strategist Viraj Patel.

Also watch UK PMI data this week with manufacturing, construction and services PMI’s being released on Wednesday, Thursday and Friday respectively.

Manufacturing is expected to pull-back a basis point to 56.0, Construction forecast to 53.8 from 54.2 and Services to 55.8 from 56.2.