GBP/USD holds ground around 1.3350 as US Dollar weakens ahead of Fed decision

• GBP/USD inches higher, extending its recovery after rebounding from Tuesday's two-month low of 1.3307.
• The Fed is anticipated to leave its benchmark interest rate unchanged in July.
• The Pound Sterling faced headwinds amid cooling labor market conditions and persistent inflationary pressures.

GBP/USD edges higher after four days of losses, trading around 1.3360 during the Asian hours on Wednesday. The pair gains ground as the US Dollar (USD) remains subdued ahead of US Federal Reserve (Fed) interest rate decision later in the North American session.

The US Fed is widely expected to leave its benchmark interest rate unchanged at 4.25% to 4.50% in July. Traders are now pricing in 97% odds of no change to interest rates at the July meeting, according to the CME FedWatch tool.

The FOMC press conference will be observed for any signs that rate cuts may start in September. Traders are also awaiting key economic data this week, including the Q2 Personal Consumption Expenditures (PCE) inflation report and July's Nonfarm Payrolls, for further insight into the health of the US economy.

However, the GBP/USD pair faced challenges as the Pound Sterling (GBP) struggled due to cooling labor market conditions and elevated inflationary pressures. This scenario could force the Bank of England (BoE) to perform a balancing act in its monetary policy decision next week.

Meanwhile, lifted food sales, overall economic momentum remains weak, with disappointing PMI data fueling expectations of a 25 basis point rate cut by the Bank of England in August, and another likely by year-end as it pivots toward supporting growth.