GBP/USD stays near 1.3350 as traders adopt caution due to UK inflation risks

• GBP/USD holds ground as the Pound Sterling steadies on the uncertain BoE policy stance.
• BoE's Megan Greene signals caution on rate cuts, hints at November pause amid rising inflation risks.
• The US Dollar receives support as strong economic data may slow the Fed's interest rate cuts.

GBP/USD holds ground after two days of losses, trading around 1.3350 during the Asian hours on Friday. The downside of the pair could be restrained as the Pound Sterling (GBP) may gain ground on the United Kingdom's (UK) inflation risks and the uncertain Bank of England's (BoE) policy stance.

BoE policymaker Megan Greene urged caution on rate cuts, suggesting a pause in November as risks to inflation have shifted to the upside. However, Governor Andrew Bailey signaled that more easing is still needed. "But exactly when that will be and how much it will be will depend on the path of inflation going down," Bailey added, while noting that there is some softening in the labor market, alongside cautiousness among consumers.

Additionally, political uncertainty added to market pressure, as Greater Manchester Mayor Andy Burnham called for the re-nationalization of key services and proposed £40 billion in borrowing for housing, a move likely to rattle gilt markets already facing weak demand at bond auctions.

The GBP/USD pair faced challenges as the US Dollar (USD) advanced following stronger-than-expected economic data from the United States (US). Focus shifts toward Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve's preferred inflation gauge, due later on Friday.

Robust economic data may prompt the US Federal Reserve (Fed) to adopt a more cautious approach to cutting interest rates. The US Gross Domestic Product (GDP) Annualized grew 3.8% in the second quarter (Q2), coming in above the previous estimate and the estimation of 3.3%. Meanwhile, the GDP Price Index rose 2.1% in the same period, as compared to the expected and previous 2.0% growth. US Initial Jobless Claims declined to 218K last week, the lowest since July. The market expectations were an increase to 235K from 232K previously.