GBP/USD edges lower to near 1.2650 as latest US inflation report keeps Fed on alert

• GBP/USD faces challenges due to increasing caution surrounding the Fed's decision next month.
• US markets may witness thin trading activity due to the Thanksgiving holiday on Thursday.
• The Pound Sterling may gain ground as BoE officials support following a gradual policy-easing approach.

GBP/USD holds losses as the US Dollar (USD) advances as the latest US inflation report indicated solid growth in consumer spending for October, but it also highlighted a stagnation in progress toward lowering inflation, keeping the Fed on alert. The GBP/USD pair edges lower to near 1.2660 during the Asian trading hours on Thursday. US markets may witness thin trading activity due to the Thanksgiving holiday on Thursday, to be followed by shortened trading hours on Friday.

The US Personal Consumption Expenditures (PCE) Price Index increased by 2.3% year-over-year in October, up from 2.1% in September. Meanwhile, the core PCE Price Index, which excludes volatile food and energy prices, rose by 2.8%, slightly higher than the 2.7% recorded the previous month. Additionally, annualized US Gross Domestic Product (GDP) grew by the expected 2.8% through the third quarter.

Economic data remains limited for the United Kingdom (UK), with a similarly sparse calendar expected next week. As a result, the Pound Sterling (GBP) will largely be driven by market expectations surrounding the Bank of England's (BoE) interest rate decision in December.

Speaking at King's Business School on Monday, BoE Deputy Governor Clare Lombardelli emphasized the need for more evidence of easing price pressures before supporting further rate cuts. Lombardelli also cautioned about the risk of inflation staying above the bank's target, noting that wage growth stabilizing at 3.5%-4.0% and the Consumer Price Index (CPI) remaining around 3%--rather than the 2% target--could pose significant challenges.