Technical studies confirm the Pound might finally be turning around against the Canadian Dollar. But the near-term is prone to volatility thanks to a busy event calendar for both GBP and CAD.

The Pound-to-Canadian Dollar exchange rate has risen strongly since the Bank of England rate meeting on Thursday, which resulted in the Sterling half of the pair strengthening.

GBP/CAD has now broken clearly above a major trendline and the 50-day moving average and risen to a peak of 1.6585.

The rally comes after a period of pronounced Canadian Dollar strength with the currency benefiting from a positive economic outlook.

Turning to the charts, and we note that a break above 1.6585 would confirm a continuation of the uptrend to a target at 1.6665, at the level of the 200-day moving average (MA), which is liable to obstruct further upside, since large moving averages can provide tough support and resistance to prices.

FX Strategist Shaun Osborne at Scotiabank is even more bullish, forecasting a possible move higher to 1.67/70.

"We think the Pound is forming a significant base/reversal.

"Longer-term price signals are positive. Weekly charts show a very strong bullish engulfing line reversal against major, long-term trend support at 1.5835 (off the 2010 low) for this week. Gains to the 1.67/1.70 range look easily reachable now. Bullish, buy GBP dips."

Data, News, and Events for the Canadian Dollar

The Canadian Dollar is one of the best-performing currencies of 2017 and the road higher for GBP/CAD will therefore not be easy.

On Friday at 13.30 BST, Canadian inflation and retail sales data will be released.

Inflation is expected to rise to 1.4% in August from 1.2% previously (year-on-year) and Core Inflation by 1.0% instead of 0.9% in August 2016.

A rise in inflation will be positive for the Canadian Dollar as it suggests the Bank of Canada might consider raising interest rates even faster than than current assumptions imply.

Toronto-based investment bank TD Securities see risks tilted to the upside for inflation:

"A rebound in energy prices should help headline inflation firm to 1.5% y/y, consistent with a 0.2% m/m increase and favourable base-effects.

"This would leave Q3 inflation tracking slightly above Bank of Canada estimates from July; however, some of the headline strength can be faded given Hurricane Harvey's impact on gas prices. Measures of core inflation should remain stable but risks are skewed to the upside."

Retail sales, released on Friday at 13.30 too, is expected to rise 6.8% from 7.3% previously.

The overall outlook for the Canadian Dollar is supportive.

"Between the recovery in oil prices (crude hit $50 a barrel), solid Canadian data and a hawkish central bank that could raise interest rates one more time this year, investors still prefer the loonie and refuse to give up their long trades. Retail sales and consumer prices are scheduled for release on Friday. If they are strong and validate the BoC’s hawkish bias, we could see USD/CAD test 1.20," says Kathy Lien, Director at BK Asset Management.

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Data, News, and Events for the Pound

The Bank of England's Mark Carney will be speaking at 16.00 on Monday, September 16, in Washington DC.

With Bank of England policy being the predominant driver of Sterling at present, the comments will be closely followed for any further clarification of policy trajectory.

He is unlikely to deliver a radically different message with regards to UK monetary policy to the message which came out at Thursday's policy meeting.

He will also avoid contradicting his comments made to a press pool hours after the event in which he indicated he is part of that group of policy-makers that believe an interest rate rise in the near-future is necessary.

There is the chance that he might push back against the recent market assumption that rates will be raised in November which would be negative for the Pound; but such a move would be too risky at this stage as it would certainly cloud the picture with regards to monetary policy.

The Bank's message must be clear and unanimous in scope at this juncture, and we doubt Carney would compromise with any message other than interest rates are to rise in the near-future.

Data-wise, retail sales out on Wednesday, September 20 at 09.30 BST, will provide fresh insights on consumption trends.

It is forecast to rise 1.1% year-on-year in August (from 1.3% previously) and Core is expected to rise 1.3% from 1.5% a year ago.

The recent rise in the number of people in work, "should provide some support to consumer spending, with the jobless rate falling to its lowest since 1975," said IHS Markit's Principle Economist Bernard Aw.

"However, wage growth remains stubbornly low despite the hiring surge, which could continue to weigh on household spending," he added.

A beat on expectation should reinforce the fresh positive stance adopted by markets with regards to Sterling's outlook.

IHS Markit's Household Finance Index, a survey of house holders finances, out in the week ahead, could also be useful in measuring the pressure on consumers.

On the political front, all eyes will be on Prime Minister Theresa May when she delivers a major speech on the UK's Brexit stance in Florence, Italy on Friday 22.

The speech will be keenly watched by markets for signs that the UK will yield further concessions, or even creative ideas, to push Brexit talks forward.

Such an outcome would certainly be positive for Sterling which is remains weighed down by the uncertainty surrounding the Brexit process.

The speech will also provide domestic political intrigue in that the speech will be made nearly a week after Foreign Secretary Boris Johnson wrote a lengthy article for the Telegraph newspaper in which he laid out his vision for Brexit.

Some have interepreted the speech as a direct challenge on May's leadership.

We doubt this to be the case and would suggest it is rather a rallying call to the British public at a time when confidence regarding the Brexit process is low.

Indeed, a leadership challenge opens the door to fresh elections which in turn raises the spectre of a Labour party victory and the opening of a pandora's box of market-negative policies which bode ill for Sterling's long-term valuation.