GBP/USD extends its gains for the second straight day, trading around 1.2400 during Asian hours on Friday (1/24). The pair's gains could be attributed to remarks by US President Donald Trump on Thursday night.

President Trump said that he wants the US Federal Reserve (Fed) to cut interest rates soon. "With oil prices going down, I'm going to demand that interest rates go down soon, and interest rates go down around the world," Trump said at the World Economic Forum in Davos, Switzerland.

Traders expect the Federal Reserve (Fed) to keep its benchmark interest rate steady at 4.25%-4.50% at its January meeting. In addition, Trump's policies could boost inflationary pressures, potentially limiting the Fed to just one more rate cut.

However, the GBP/USD pair's upside could be capped as the Pound Sterling (GBP) could face headwinds following recent data including lower-than-expected UK inflation and retail sales data for December, weaker labor demand for the three months to November, and sluggish GDP growth.

These factors have led traders to anticipate a 25 basis points (bps) interest rate cut by the Bank of England (BoE) in February. Markets are now pricing in a near-certain cut in the BoE's policy rate to 4.5% at its upcoming meeting.

Traders are expected to closely watch the release of the preliminary S&P Global Purchasing Managers' Indexes (PMIs) for the UK and the US for January. Additionally, the US Michigan Consumer Sentiment Index will be in focus. These indicators are likely to provide key insights into near-term economic trends. (AL)

Source: FXstreet