The Pound to Australian Dollar exchange rate has recovered from the 1.60 lows hit on Tuesday January 17 and is moving higher.

At the time of writing on Monday morning we see the GBP/AUD quoted at 1.6474.

We are constructive for this pair's outlook and see risks tilted to the upside in the coming week.

The pair paused and consolidated during the second-half of the previous week and now looks poised to continue rising again once the consolidation ends.

The next target higher is the 1.6540 level, at the underside of the old up trendline.

A break above the 1.6434 spike highs led to a continuation higher to the above 1.6540 target.

Since the initial leap higher, the conversion has been consolidating in a narrow range which has formed into what looks like a chart pattern called a pennant, as in the triangular flags which flew from medieval castle tops.

The pennant forms after a sharp appreciation, which represents the ‘pole’ (ie which holds up the ‘pennant’).

It is a continuation pattern, which indicates the likelihood of an extension higher following a breakout from the triangular consolidation range.

Data to Watch for the Aussie

Headline quarterly inflation data for the final quarter of 2016 is forecast to read at 0.7% and annualised inflation at 1.6%.

Anything above this would likely be positive for the Australian Dollar as it suggests inflation is racing towards the Reserve Bank of Australia's 2% inflation target.

If the RBA believe inflation is going to overshoot they may hint at raising interest rates in the future, and higher interest rates command a stronger currency.

Analysts at UBS expect headline CPI to increase by 0.6% q/q in Q4, due to a larger than expected rebound in fuel, alcohol & tobacco and recreation.

"Nonetheless, inflation is seen staying below the RBA's 2-3% target for a 9th quarter. Unless underlying CPI falls below the 11⁄2% y/y 'line in the sand', the RBA is likely to hold ahead," says UBS strategist Jaojiang Zhao.

The Pound this Week

Since Prime Minister May has already said she will be opening up Brexit to a parliamentary vote, the decision will only have a limited impact.

There is, however, a risk that the law lords could say the devolved parliaments of the other parts of the United Kingdom – Scotland, Wales and Northern Ireland - may also be allowed a vote, which could delay the whole Brexit process.

It is therefore possible that devolved parliaments might vote against triggering Article 50 as an expression of their opposition to Brexit.

“If the Scottish and Northern Irish devolved parliaments are entitled to vote on the matter, this could delay Brexit further. In addition, it is possible that local politicians could vote to reject the proposal on behalf of their constituents,” said Siobhan Fenton, writing for the Independent.

This will introduce a fresh layer of uncertainty for the UK and we believe it would actually be negative for the Pound which runs counter to the currency's reaction when the initial rulings on Article 50 were made by the High Court in 2016.

The big data release next week will be Q4 GDP revisions, out at 9.30 GMT, which is expected to show growth of 2.1% year-on-year and 0.5% month-on-month.

“Our economists are looking for 0.5%q/q, as a robust contribution from the service sector is expected once again. Survey indicators remain healthy, suggesting that some of that momentum is carrying in to 2017. Consensus is now looking for a shallower and longer hit to UK activity as a result of EU exit,” says Ryan Djajasaputra at Investec.