The Reds secured a morale-boosting 1-0 win against Augsburg in the Europa League on Thursday night as James Milner’s penalty secured their place in the last-16 draw.
Manchester City, meanwhile, were justified in their decision to rest their big names for their FA Cup defeat last Sunday as the Citizens were 3-1 winners in the first leg of their Champions League last-16 tie in Kyiv on Wednesday night.
Liverpool beat City 4-1 in their only Premier League meeting of the season so far in November thanks to Eliaquim Mangala’s own goal and efforts from Philippe Coutinho, Roberto Firmino and Martin Skrtel.
However, Gray is confident Manuel Pellegrini side will get the job done in the League Cup showpiece at Wembley on Sunday afternoon.
“I fancy Manchester City. They had another great result in Kiev on Wednesday,” Gray told Paddy Power’s blog.
“They’ve all their big players fit apart from Kevin De Bruyne and Yaya Toure looked back to his best in the away game.
“Liverpool are so hot and cold these days. They need their best form to come out and hope that City have an off day.
“Aguero’s back scoring and he got one during the week. He could well open the scoring. I’d be looking at Toure as well, and for Liverpool, maybe Firmino.”
Enhanced odds: Get 10/1 odds on Liverpool to beat Man City
City won the League Cup in 2014, whilst Liverpool haven’t won the competition since 2011.
MORE: Man United latest news
MORE: Arsenal latest news
MORE: Chelsea latest news
MORE: Liverpool latest news