GBP/USD struggles near 1.2300 due to differing policy stances between central banks

• GBP/USD faces challenges as the US Dollar strengthens, with expectations that the Fed will maintain its rate in January.
• The Pound Sterling struggles as traders anticipate a 25 basis point interest rate cut by the BoE in February.
• Traders expect to closely watch the release of Friday's preliminary S&P Global Purchasing Managers Index for both countries for January.

GBP/USD remains subdued for the second successive session, trading around 1.2320 during the Asian hours on Thursday. The pair faces challenges as the US Dollar (USD) received support as President Donald Trump issued a memorandum instructing federal agencies to investigate and address ongoing trade deficits.

The Greenback could further appreciate as traders expect the US Federal Reserve (Fed) to keep its benchmark overnight rate steady in the 4.25%-4.50% range at its January meeting. Moreover, Trump's policies could drive inflationary pressures, potentially limiting the Fed to just one more rate cut.

The Pound Sterling (GBP) continues to face pressure following weaker-than-expected UK inflation and retail sales data for December, sluggish labor demand in the three months leading up to November, and modest GDP growth. As a result, traders are anticipating a 25 basis point (bps) interest rate cut by the Bank of England (BoE) in February. It is nearly certain that the BoE will reduce rates to 4.5% during its upcoming policy meeting.

Traders are expected to closely watch the release of Friday's preliminary S&P Global Purchasing Managers Index (PMI) for both the United Kingdom and the United States for January. Additionally, the US Michigan Consumer Sentiment Index will be in focus. These indicators are likely to offer important insights into short-term economic trends.