LONDON, Oct 4 Reuters The British pound gained ground against the dollar and the euro on Friday after a steep plunge a day earlier when Bank of England Governor Andrew Bailey had said more aggressive interest rate cuts might be on the table.

Bank of England Chief Economist Huw Pill on Friday called for a more cautious approach to lowering rates, aiding sterling39;s 0.3 rise on the day to 1.317.

But the pound was still headed for its steepest weekly decline in more than a year after Bailey on Thursday said the BoE could become a bit more activist and a bit more aggressive in its approach to lowering rates.

Bailey39;s comments caused an unwinding of long positions in the pound, ING FX strategist Francesco Pesole said. Sterling has gained about 3.4 so far this year, outperforming other G10 currencies on the back of expectations that the BoE will keep rates higher for longer than those elsewhere.

There is further room for position squaring to weigh on sterling unless BoE communication or data force another hawkish repricing … We still think 1.30 can be hit in sterling in the coming weeks, Pesole said.

The dollar was flat against a basket of other major currencies ahead of the crucial U.S. payrolls report due at 1230 GMT that could provide more clues on the state of the U.S. economy and shape the Federal Reserve39;s next steps in the ratecut cycle.

In Britain, the latest industry survey showed that the construction sector grew at its fastest pace in nearly two and a…