LONDON, Dec 23 Reuters The British pound edged up against the U.S. dollar and euro on Friday in thin trading conditions, but was still set for its third straight weekly drop against both currencies.

The pound was last up 0.2 versus the dollar at 1.2055. It hit its lowest level in over three weeks on Thursday at 1.1993.

Against the euro, the pound was up 0.1 at 87.94 pence, having hit its weakest level against the single currency since October 12 on Thursday.

Victoria Scholar, head of investment at interactive investor, said the pound was unwinding some of its move from the earlier part of the week, with attention turning to U.S. personal consumption expenditures PCE data due at 1330 GMT.

The U.S. dollar is acting cautiously ahead of the latest inflation reading as traders await clues about the Federal Reserve39;s next move, Scholar said.

The Federal Reserve Fed and the Bank of England BoE both raised rates in December by a smaller clip than previous meetings, although both expect more rate hikes will be needed to help bring inflation down to target.

Scholar expects the pound to find support if signs grow larger that the Fed39;s tightening cycle could be coming to an end.

The pound has already been benefiting from expectations of less hawkish Fed policy since the trough in September with the potential for that uptrend to extend into next year, Scholar said.

Sterling is up 8 against the greenback in the quartertodate, heading for its biggest quarterly gain in 13…