• EUR/GBP remains stronger ahead of HCOB PMI data from the Eurozone and Germany.
• ECB policymaker Martins Kazaks said that the current interest rate level is very appropriate and can remain unchanged.
• BoE’s Mann warned that the risk of “higher-for-longer” inflation is materializing, highlighting persistent price pressures.

EUR/GBP extends its gains for the second successive session, trading around 0.8720 during the Asian hours on Friday. The currency cross appreciates as the Euro (EUR) gains ground due to the potential for a cautious policy stance from the European Central Bank (ECB).

Traders await HCOB Purchasing Managers’ Index (PMI) data from the Eurozone and Germany due later in the day. Eurozone Producer Price Index (PPI), with S&P Global United Kingdom’s (UK) PMI, will also be eyed.

ECB policymaker Martins Kazaks said Thursday that the current level of interest rates is “very appropriate” and can be maintained. Kazaks added that uncertainty remains very high and must retain full freedom of action.

The upside of the EUR/GBP cross could be restrained as the Pound Sterling (GBP) consolidates amid rising uncertainty regarding the Bank of England’s (BoE) policy outlook. BoE policymaker Catherine Mann said Wednesday that the risk of “higher-for-longer” inflation is materializing, emphasizing concerns over persistent price pressures. Mann added that keeping rates on hold is appropriate for the current period.

On the contrary, BoE Deputy Governor Sarah Breeden warned on Tuesday that tight monetary policy conditions could push inflation below their 2% target. “Risks in holding policy too tight for too long could pull inflation below target,” Breeden added.

The latest BoE Decision Maker Panel (DMP) quarterly survey released on Thursday showed that “one-year ahead expected CPI inflation by the UK firms edged slightly higher to 3.5% in the quarter to September.” UK firms also reported that their realised annual own-price growth rose slightly to 3.8%, up 0.1% from August.