No hes clearly not trusted at the mo.
I think that Pep was not satisfied with the left side attacking combo for some time. We had some struggles on that side vs Totterham/Everton, Cancelo was heavily man marked and the ball was not going smoothly as usual.
Grealish pulled out 2 good game at LW spot since he returned from injury vs Peterbough and Man U. But honestly they were not very good teams.
Grealish started as LW again vs Crystal Palace. Although he played not bad (and I thought was actually 2nd best attacking player following KDB on that day), the draw clearly had affected Pep's mind a lot. He lost the "trust" after that match.
In the following games, Pep either raised the tempo by using Sterling LW, or focused attacking on the right side rather than usual left side.
As Pep described, Grealish could play a tempo controller role. Grealish plays less and less recently. It shows that Pep weakens the usual requirement of tempo controlling and wishes to go more direct.
The bright side is - we beat Southhampton first time this season. A show case game vs Liverpool which would be a PL classic for years to remember.
The down side is - A raised tempo requires full backs to run/defend much much more. Given the busy schedule, it exposed our weakness. We don't have much depth on the back line especially full backs. It put us into a very difficult situation.
We will see if Pep's gamble wins after the game vs Real.
Some stats to support my view
According to FBref among all competitions for City this season (PL CL FA EFL Community)
Looking at xG allowed per 90 stats by the team when playing Sterling vs Grealish
Sterling 0.82 (highest among all regular players following Carson, Mendy, Steppen and Ferna)
Grealish 0.58 (lowest among all current 1st squad player)
I see Grealish better as a safe net when we need control and protect a lead. But if we want to be more pacy and danger - Sterling fits in better.