EUR/GBP corrects further from monthly tops, slides below mid-0.8500s

The EUR/GBP cross added to its intraday losses and dived to three-day lows, around the 0.8540 region in reaction to a more hawkish Bank of England.

The cross extended the previous day's retracement slide from the vicinity of monthly tops, around the 0.8615 region and witnessed aggressive selling on Thursday. The intraday bearish pressure aggravated during the mid-European session after the BoE announced its latest monetary policy decision.

As was widely anticipated, the UK central bank left the benchmark interest rate unchanged at 0.10% and the Asset Purchase Facility steady at £895 billion at the end of the September policy meeting. However, the BoE indicated that a modest tightening over the forecast period was likely to be necessary.

This, in turn, was seen as a key factor behind the British pound's relative outperformance and dragged the EUR/GBP cross. That said, the emergence of heavy selling around the US dollar provided a goodish lift to the shared currency and helped limit any deeper losses for the EUR/GBP cross.

Hence, it will be prudent to wait for some follow-through selling before positioning for any further depreciating move. From current levels, any subsequent slide is likely to attract some buying near the 0.8530 region and remain limited near monthly lows, around the key 0.8500 psychological mark.

Technical levels to watch