GBP/USD extends its upside above the mid-1.2700s on the risk-on sentiment

• GBP/USD extends the rally near 1.2759 amid the risk-on sentiment.
• Fed’s Bostic said inflation in the US has declined further than he had anticipated.
• The Bank of England’s (BoE) former member said the BOE will not be in a position to begin cutting rates in 2024.

The GBP/USD pair traded in positive territory for the fifth consecutive day during the early Asian trading hours on Tuesday. Positive risk-on sentiment and a slight decline in the US Dollar (USD) are supporting the major pair's uptick. At press time, GBP/USD is trading at 1.2759, up 0.05% on the day.

The US labor data last week weakened the Federal Reserve's (Fed) case for rate cuts. Traders are pricing in around 62% odds of rate cuts in the March meeting, according to the CME Fedwatch tool. The New York Fed's 1-year inflation expectations came in at 3.01% versus 3.36% prior.

Fed Atlanta President Raphael Bostic said on Monday that inflation in the United States has declined further than he had anticipated. Furthermore, he affirmed that the rise in unemployment is "far less" than what would typically be expected given the decrease in inflation, while mentioning that the Fed is currently in a "very strong position.”

On the British Pound front, a former member of the Bank of England’s (BoE) monetary policy committee, DeAnne Julius, said the central bank will not be in a position to begin cutting interest rates in 2024. She added that the escalating tensions in the Middle East could contribute to a new round of energy price rises, resulting in a new inflation shock.

Later on Tuesday, the US Goods Trade Balance for November will be due. However, this low-tier data might not impact the market. Attention will turn to the US Consumer Price Index (CPI) on Thursday. On Friday, the UK monthly Gross Domestic Product (GDP) for November, Industrial Production, and Manufacturing Production will be released. Furthermore, many Fed officials are set to speak this week, including Barr (Tuesday), Williams (Wednesday), and Kashkari (Friday).