EUR/GBP stands at risk for a larger correction amid the sharp rebound following the European Central Bank (ECB) interest rate decision, and the pair may continue to retrace the decline from the October high (0.7492) especially as the Relative Strength Index (RSI) breaks out of the bearish formation carried over from back in August.
Chart - Created Using FXCM Marketscope 2.0
Even though the Bank of England (BoE) remains on course to normalize monetary policy, another 8-1 split at the December 10 interest rate decision may produce near-term headwinds for the sterling as Governor Mark Carney remains in no rush to raise the benchmark interest rate off of the record-low. The long-term outlook for EUR/GBP remains tilted to the downside amid the deviating paths for monetary policy but, the less-aggressive easing package from the ECB accompanied by more of the same from the BoE may spur a larger rebound in EUR/GBP over the remainder of the year.
--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
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