EUR/GBP edges higher on French political clarity hopes, BoE caution

• EUR/GBP edges higher toward 0.8690 on Thursday, supported by signs of political stabilization in France.
• French President Emmanuel Macron is expected to appoint a new Prime Minister by Friday evening.
• Cautious comments from the Bank of England weigh on the British Pound.

EUR/GBP strengthens slightly around 0.8690 on Thursday, up 0.1% for the day at the time of writing. The pair finds modest support for the Euro (EUR) after the Élysée announced late on Wednesday that French President Emmanuel Macron will appoint a new Prime Minister within "the next 48 hours." The move aims to end the political crisis triggered by the resignation of former Prime Minister Sébastien Lecornu and reassure markets about France's ability to pass a budget before year-end.

However, political uncertainty remains a limiting factor. According to ING, the announcement has reduced the probability of early snap elections, at 37% on Polymarket on Thursday compared with 70% the previous day. However, investors remain attentive to the stability of the parliamentary majority and the appointment of the next head of government.

"And after spiking to the high-80s on Monday, the French:German OAT:Bund spread is drifting back to the low-80s. This news may be enough to buy the Euro a reprieve until Friday evening at least", noted the bank.

On the monetary front, the European Central Bank (ECB) Minutes from the September meeting, due later on Thursday, are expected to reaffirm that policy is "in a good place." Analysts at Brown Brothers Harriman anticipate that officials will maintain a neutral tone, acknowledging inflation stabilization around 2% and risks now "balanced." 

Regarding the British Pound (GBP), recent comments from Bank of England (BoE) officials continue to encourage caution. Chief Economist Huw Pill on Wednesday called for a "conservative" approach to setting interest rates, while Monetary Policy Committee member Catherine Mann on Thursday emphasized the need to keep policy "restrictive for longer" amid persistently high inflation. These remarks add uncertainty over the BoE's policy outlook and weigh on the GBP's potential to rebound.

In this context, the EUR/GBP pair holds modest gains, supported by a steadier Euro but capped by lingering French political tensions, while the British Pound remains constrained by limited visibility over the BoE's future policy path.