• EUR/GBP appreciates as the ECB's September policy meeting indicates the policy stance remains consistent.
• The Euro may face challenges amid the ongoing political struggle in France.
• BoE Mann said that policy must remain restrictive for longer, while inflation remains stubborn.

EUR/GBP extends its gains for the second successive day, trading around 0.8700 during the Asian hours on Friday. The currency cross gains ground as the Euro (EUR) receives support after the European Central Bank’s (ECB) September policy meeting showed that policymakers broadly agreed the current policy stance remains consistent with the 2% medium-term inflation target. ECB members concurred that current interest rates are sufficiently strong to handle potential shocks amid two-sided inflation risks.

However, the EUR/GBP cross may weaken as the Euro could struggle due to the ongoing political turmoil in France, the second-largest Economy in the Eurozone. The resignation of French Prime Minister Sebastien Lecornu has heightened investor concerns over the country’s fiscal deficit. Lecornu is continuing negotiations with the opposition, while President Emmanuel Macron is expected to appoint a new prime minister by Friday.

However, the upside of the EUR/GBP cross could be restrained as the Pound Sterling (GBP) receives support from the cautious tone surrounding the Bank of England’s (BoE) monetary policy outlook. The BoE policymaker Catherine Mann noted on Thursday that the monetary policy must remain restrictive for longer to create an environment conducive to growth. "Inflation remains persistent and the outlook for growth remains modest," Mann added as per Reuters.

In a letter shared by the United Kingdom’s (UK) finance ministry on Wednesday, Chief Secretary to the Treasury James Murray said that the administration would not allow agencies to use emergency funds to fund pay rises, aiming to restrict the wage spiral. “This prudent but tough approach to public spending is what will help build a stable economy," Murray added.