- UK GDP growth forecasts upgraded

- Phase 3 reopening proceeds

- Eyes on inflation and employment data Tues & Weds

- Friday sees retail and PMI releases

Above: Prime Minister Boris Johnson holds a Covid-19 press conference at No9 Downing Street with Chief Medical Officer, Professor Chris Whitty.. Picture by Andrew Parsons / No 10 Downing Street.

Market rates at publication: GBP/EUR: 1.1614 | GBP/USD: 1.4058Bank transfer rates: 1.1388 | 1.3789Specialist transfer rates: 1.1530 | 1.3984Get a bank-beating exchange rate quote, hereSet an exchange rate alert, hereThe British Pound starts the new week trading above 1.16 against the Euro and just below 1.41 against the U.S. Dollar, with near-term direction likely to rest on economic data releases which should allow economists to assess the state of the country's economic revival.

The UK economic rebound is underpinned in large by the country's steady exit from lockdown restrictions, with a phase three of the unlocking coming on Monday.

Economists surveyed by Bloomberg have revised up their forecasts for 2021 growth to 6%, which would mark the strongest growth since 1973.

The upgraded forecasts mean the UK will lead the economic recovery among major European nations with its fastest growth in almost half a century, with economists saying the growth comes on the back of the rapid vaccine rollout which allows the government to loosen lockdown rules.

Prime Minister Boris Johnson said Friday that Phase 3 of reopening would go ahead, despite concerns over the Indian Covid-19 variant taking hold in parts of England.

Indoor dining will be allowed again, cinemas will reopen and schools and university's will be back to normal.

The development is expected by economists to bestow the economic rebound further impetus, which analysts say is on balance supportive of the Pound.

However, Johnson warned the final phase of unlocking scheduled for June 21 could be delayed owing to the Covid-19 variant that was first detected in India which risks pushing up caseloads once more.

Scientific advisors and politicians have all pointed to the development with a sense of anxiety and any delays to unlocking could prove to be a negative against the Pound.

Those watching FX markets are therefore urged to keep an eye on this development over coming days and weeks.

Above: GBP/EUR at hourly intervals with fibonacci retracements of May recovery and 21-hour moving-average

How Pound Sterling navigates coming days could well depend on the flavour of some key UK data releases, with the rule of thumb that a beat on expectations is supportive of the currency while a miss could see some declines.

"In the near term, the FX market focus will remain on the UK data releases – labour market data, CPI and retail sales for the month of April as well as the preliminary PMIs for May," says Valentin Marinov, Head of G10 FX Strategy at Crédit Agricole.

Data matters again for foreign exchange markets which have become increasingly attuned to the health of the global economic recovery of late, evidenced by the sizeable reactions in the U.S. Dollar to labour and inflation data over recent weeks.

"The macro agenda scheduled in the coming days might allow both the EUR and GBP to regain some ground against the greenback, should preliminary PMI surveys for May, to be released in both areas, offer further signs of optimism," says Roberto Mialich, a foreign exchange strategist with UniCredit Bank in Milan.

Ahead of the data dump, the Pound-to-Euro exchange rate (GBP/EUR) is quoted at 1.1608 and the Pound-to-Dollar exchange rate (GBP/USD) is quoted at 1.4080.

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Should the labour market figures come in sharply lower than the market expects, the Pound could come under pressure whereas a beat on expectation could offer some upside.

"Labor data, CPI inflation and retail sales in the UK represent the other major economic tests for the GBP," says Mialich.

Inflation numbers are then due at 7:00 GMT mid-week and the consensus is looking for a reading of 1.40% for April, a doubling on March's figure.

Recall it was blowout inflation numbers out mid-week in the U.S. that sent the Pound-Dollar exchange rate sharply lower.

"Given renew ed market concerns about inflation, the April CPI reading is also likely to get attention," says Rhys Herbert, Senior Economist, Commercial Banking, at Lloyds Bank.

Is the UK likely to repeat the U.S. experience? If yes, then the Pound could find itself bid against both the Dollar and Euro as markets would likely tentatively bring forward expectations for when the first interest rate rise at the Bank of England is due to take place.

Above: GBP/USD reactions to inflation data, image courtesy of MUFG.

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"Recent UK CPI releases have surprised to the downside, most notably in February when headline CPI fell to an annual rate of 0.4%. It triggered a larger GBP sell off," says Derek Halpenny, Head of Research, Global Markets EMEA at MUFG.

But analysts at Capital Economics say while UK inflation is almost certainly likely to have jumped in April, it is not likely to have jumped as high as in the U.S.

Economists are currently largely of the view there are significant price pressures building, but crucially they are held to be largely temporary and linked to the reopening of the global economy.

However, Thomas Pugh, UK Economist at Capital Economics says the "big risk is that the UK follows the US and a reopening-linked rebound in demand puts more upward pressure on prices than we currently expect."

Above: GBP/USD reaction to inflation data as time passes, image courtesy of MUFG.

Data prints are also likely to be unusually large owing to 'base effects' which simply refers to a comparison with the unusually sharp declines witnessed in the economy at this point last year when Covid was wrecking havoc.

Friday brings with it retail sales data, however the more important release of the day will be flash PMI's for May, due at 09:00 GMT.

The PMI survey is the most keenly anticipated release of short-term data available to economists, giving a snap shot of how the economy is performing.

Whereas official data from the ONS is delayed by weeks the PMIs are certainly more timely.

Above: UK PMIs also point to firm growth say Lloyds Bank.

The Composite PMI for May is forecast to come in at 60.0, unchanged on the April.

The Manufacturing PMI is forecast at 60.7, unchanged on the previous month.

The Services PMI is forecast to come in at 60.1, again unchanged on the previous month.

But heading into the new week, there is a word of caution from Crédit Agricole's Marniov for any Sterling bulls out there:

"We think that a lot of positives are already in the price of the GBP with GBP/USD looking overvalued according to our short-term and long-term fair value models. Subsequently, we think that overvaluation concerns could limit any upside in the currency in the very near term."