GBP/USD holds steady above 1.3550 as investors await UK GDP, US PPI releases

• GBP/USD flat lines near 1.3575 in Thursday's Asian session.
• The UK Unemployment Rate hit a 4-year high of 4.7% amid economic downturn. 
• UK Q2 GDP and US July PPI reports will be in the spotlight later on Thursday. 

The GBP/USD pair trades on a flat note around 1.3575 during the Asian trading hours on Thursday. Traders prefer to wait on the sidelines ahead of the key data from both the United Kingdom (UK)  and the United States (US). The preliminary reading of UK Gross Domestic Product (GDP) for the second quarter (Q2) will be published later on Thursday, followed by US Producer Price Index (PPI) data for July. 

Signs of cooling in the US labor market have pushed futures to bake in a series of rate reductions before the end of the year. This, in turn, might drag the Greenback lower against the GBP. Fed funds futures traders are now pricing in nearly a 94% probability of a 25 basis point (bps) cut at the September meeting, up from an 85% chance before the inflation data release, according to the CME FedWatch tool.

Investors brace for the US PPI report later on Thursday. The headline PPI is estimated to show an increase of 2.5% YoY in July, while the core PPI is expected to show a rise of 2.9% YoY during the same report period. If the report shows a hotter-than-expected outcome, this could prompt traders to reduce Fed rate cut bets and help limit the USD's losses. 

Data by the Office for National Statistics (ONS) released on Tuesday showed that the UK Unemployment Rate was unchanged at 4.7% in the three months to June, matching the estimation. This figure registered the highest level since July 2021. Meanwhile, the Average Earnings Excluding Bonus remained at 5.0% in the three months to June.

Traders will keep an eye on the UK Q2 GDP report, as it might offer some hints about the UK interest rate path. Weakening GDP growth could add further pressure to Bank of England (BoE) policymakers at a time when they are worried about elevated inflationary pressures.