GBP/CAD has broken clearly out of its extended sideways range and moved higher, reaching the current 1.6731 highs.

There is a possibility Pound Sterling might have already, or be close to peaking, so we are reluctant to forecast a straight move higher in the coming week.

Nevertheless, it has also not shown any strong signs of bearishness either.

The problem for those anticipating further Pound Sterling strength is that the formidable obstacle of the 200-day moving average sits not much above the current market level, at 1.6780:

This area of supply is likely to repulse buyers and with it the exchange rate unless Sterling is subjected to particularly strong upwards drivers over coming days.

With the likely triggering of Article 50 in the coming week the calendar is certainy heavy making us cautious of recommending any further substantial upside moves.

A break clearly above the 200-day, however, would probably result in continuation higher, but such a clearance could only be confirmed by the exchange rate surpassing the 1.69s.

So it is that level at 1.6780 which will be key for this market in the near-term.

Data, Events for the Canadian Dollar

The week kicks off with a speech from the Governor of the Bank of Canada, (BOC) Stephen Poloz on Tuesday, March 28 at 14.10 GMT, who is expected to mention the recent strength in the housing market but also the underperformance of business investment.

He is expected to strike a cautious tone overall, say analysts at TD Securities:

“He may comment on the strength in housing but he is unlikely to suggest the situation requires higher policy rates. We expect Poloz’s message to remain cautious, stressing the lacklustre performance of business investment.”

Such a cautious tone could result in Canadian Dollar weakness we believe.

The other main data release is GDP data on Friday, March 31 at 12.30, which is forecast to show a subdued rise of 0.3% in January, as it did in December.

Additionally, Futures market data has shown an extreme swing in sentiment towards the Canadian Dollar from investors being bullish (more net longs than shorts) to them being more bearish (more net shorts than longs).

This indicates the 'smart money' – hedge funds and large speculators – think the currency is going to weaken.

These sorts of sudden swings in sentiment are often strong indications that the trend for the currency may be changing, and would suggest more upside for GBP/CAD even though the Pound also has more shorts than longs.

Events and Data to Watch for the British Pound this Week

Theresa May’s triggering of Article 50 is likely to be the main event in the coming week; and Wednesday 29 is a likely date.

“We expect GBP/USD to fall quickly when the announcement is made but it should recover swiftly when the inevitable happens and investors finally realise the negotiation process will be long and filled with delay,” says Kathy Lien, managing director at BK Asset Management.

Why Sterling would fall after the event is perplexing in our view - it is clearly well signposted and there is unlikely to be any new information on the outlook.

Any potential drivers for Sterling will come in the succession of events following the triggering of Article 50 - for instance, the Europeans laying out their proposed negotiating timetable. But event here we see little of substance to bother the Pound. It is only when negotiations get underway in earnest will Sterling move.

Analysts at Barclays meanwhile reckon that the triggering of Article 50 could potentially align with a longer-term recovery they expect Pound Sterling to undertake.

“We expect the triggering of Article 50 to initiate a ‘sell the rumour, buy the fact’ rebound in GBP from historic undervaluation as ambiguity over Brexit recedes,” says Marvin Barth, a foreign exchange analyst with Barclays bank in London.

Expect the European Commission to slap a divorce bill on Britain in the early stages of this whole process.

The Commission wants the UK to pay for all its outstanding spending commitments until 2020, which amounts to a bill of 50-60 billion Euros. Needless to say the UK does not agree with the figure.

Why would it the UK pay for a club it is no longer part of? Yes, these spending committments have been made, but they were made under the assumption that the UK would benefit from single market it is helping maintain via spending committments.

The EU wants this issue dealt with ahead of trade negotiations which suggests they don't want the UK to use the bill as a negotiating chip. Understandably, the UK wants the bill and negotiations to run concurrently.

We expect the tug-of-war over these various issues to potentially inject volatility into Sterling markets, but don't see any fundamental shift in direction resulting.

It is the trade negotiations that will be of utmost importance and these will only likely be tackled towards the end of 2017.

On the data front, it is a quiet week.

GDP data is out at 08.30 GMT on Friday March 31 but it is just a third and final revision and therefore highly unlikely to surprise. Growth for the final quarter 2016 is forecast to remain at the 0.7% announced by the ONS previously.

Mortgage Approvals, also out on Friday are not forecast to move much and thus seem unlikely to have much impact on the market.