EUR/GBP remains above 0.8700, downside potential appears due to BoE caution

• EUR/GBP may depreciate as the Pound Sterling receives support from the BoE's cautious stance.
• BoE policymaker Catherine Mann warned Wednesday that the risk of "higher-for-longer" inflation is materializing, highlighting persistent price pressures.
• ECB's Lagarde said there are no significant threats to the euro-area inflation outlook but stressed the importance of remaining vigilant.

EUR/GBP inches higher after two days of losses, trading around 0.8710 during the Asian hours on Thursday. The currency cross may further lose ground as the Pound Sterling (GBP) receives support from the cautious remarks from the Bank of England (BoE) officials.

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.

BoE Deputy Governor Clare Lombardelli warned on Tuesday that officials should not consider inflation shocks as temporary. Lombardelli stated that an increase in inflation could be from a one-off event, but its impact could prove to be more persistent.

Eurostat published the Eurozone Harmonized Index of Consumer Prices (HICP) report on Wednesday, with annual inflation rising to 2.2% in September, as expected, from a 2% increase in August. The core HICP advanced 2.3% YoY in the same period, as expected. Meanwhile, the bloc's HICP inflation held steady at 0.1% month-over-month (MoM), matching August's reading. Core HICP rose 0.1% MoM, down from a previous increase of 0.3%.

The annual inflation and core inflation both came above the European Central Bank's (ECB) target of 2.0% YoY. However, the European Central Bank (ECB) President Christine Lagarde said there are no major threats to the euro-area inflation outlook but emphasized the need for continued vigilance. Her comments suggested the ECB is in no hurry to cut borrowing costs.