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GBP/USD appears to be reversing course ahead of the monthly low (1.3731) as Bank of England (BoE) Governor Andrew Bailey argues that the “economy is bouncing back swiftly,” and fresh data out of the UK is likely to affect the British Pound as the central bank boosts the region’s economic outlook. Fundamental Outlook for the Pound: Bullish GBP/USD has hardly changed from the beginning of the month, as BoE Governor Bailey expects the UK output gap “to be filled by the end of this year,” adding that “it is crucial not to over-react to momentarily strong growth and inflation” during a speech at the Mansion House. The comments suggest the Bank of England is not in a hurry to change gears because the UK is seeing “a rapid but uneven recovery,” but the Consumer Price Index (CPI) update may put pressure on the Monetary Policy Committee (MPC) to develop an exit strategy. The headline figure is expected to rise to 2.2 percent in June, up from 2.1 percent in May, marking the highest level since November 2018. At the same time, employment is expected to grow by 90K in April after growing by 113K the month before, and a slew of positive data releases might drive a stronger comeback in GBP/USD, encouraging the Bank of England to progressively revise its monetary policy forward guidance. A slew of poor data releases, on the other hand, are likely to drag on the British Pound because they allow the Bank of England to maintain its current monetary policy course. It remains to be seen whether Governor Bailey and his colleagues will follow the same script at the next interest rate decision on August 5, when the central bank is expected to update the quarterly Monetary Policy Report (MPR). Fresh data out of the UK is likely to affect GBP/USD as the MPC’s 8 to 1 divide lingers, and an increase in the CPI combined with additional improvement in the labor market might spark a wider schism within the BoE as the central bank adopts a more optimistic perspective for the region. —- Currency Strategist David Song wrote this article. @DavidJSong is my Twitter handle./nRead More

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