GBP/USD stalls after recent highs amid Bank of England's dovish rate cut

GBP/USD is trading at 1.31716 on the daily chart, retreating slightly from its recent high near 1.3200. The pair has been on a strong uptrend since mid-July, but the momentum appears to be waning as traders digest the latest developments from the Bank of England.

The BoE recently cut interest rates by 0.25% to 5.0%, marking its first rate cut in over four years. This decision, although expected by some, signals a more cautious approach by the central bank as it balances inflationary pressures with concerns about economic growth. The rate cut, which was narrowly decided by the Monetary Policy Committee, reflects the BoE's view that while inflation has temporarily met its target, risks remain, especially with expectations of rising inflation later this year due to higher energy prices​.

This dovish shift has caused some profit-taking in GBP/USD, as traders reassess the likelihood of further rate cuts. The 1.3135 level now serves as a critical support zone, with a break below potentially leading to further declines. Conversely, holding above this level could see the pair resume its upward trajectory.