EUR/GBP softens below 0.8650 amid fears of French political crisis

• EUR/GBP weakens to around 0.8630 in Wednesday's early European session. 
• French PM is expected to lose a confidence vote in September, weighing on the Euro. 
• BoE's Mann said a "more persistent hold on Bank Rate is appropriate right now."

The EUR/GBP cross trades in negative territory near 0.8630 during the early European session on Wednesday. The Euro (EUR) weakens against the Pound Sterling (GBP) amid French political uncertainty as French Prime Minister (PM) François Bayrou might lose a confidence vote on September 9.

France is braced for a new political crisis as the minority government of François Bayrou appears almost certain to be toppled in a confidence vote next month, amid deep political divisions over an unpopular austerity budget and debt-reduction plan. This, in turn, could exert some selling pressure on the EUR. 

Additionally, the worse-than-expected German GfK Consumer Confidence Survey contributed to the shared currency's downside. German GfK Consumer Confidence came in at -23.6 in September versus -21.7 prior (revised from -21.5). This figure came in below the market consensus of -21.5. 

Traders reduce odds of further Bank of England (BoE) rate cuts amid persistent inflationary pressures. BoE Monetary Policy Committee member Catherine Mann, the most hawkish voice, said on Tuesday that she saw a strong case to keep the interest rate on hold for a prolonged period, underscoring concerns at the UK central bank about persistent inflation.

Her remarks came after an unexpected decision to cut interest rates earlier this month and data last week showing UK inflation hitting an 18-month high of 3.8%. Her hawkish comments provide some support to the GBP and create a headwind for the cross.