EUR/GBP advances about 0.8400 while German debt reforms weigh on the moderate expectations of the ECB

• The EUR/GBP rises abruptly to about 0.8400 while the euro exceeds its peers in the middle of the debt restructuring plan in Germany.
• The ECB reduced its interest rates at 25 basic points on Thursday, as expected.
• Catherine Mann of the BOE sees the need for a rapid policy relaxation cycle due to the uncertainty of the global market.

The EUR/GBP PAR rises to a key level of 0.8400 in the American session on Friday. The asset is strengthened as the euro (EUR) exceeds its peers, with the operators reducing moderate bets of the European Central Bank (ECB) in the expectations that the restructuring of the German debt would accelerate inflationary pressures. Such a scenario would force the ECB to Pausar the cycle of monetary policies at the April meeting.

This week, German leaders, including the probable new Frederich Merz Foreign Minister, have agreed to create an infrastructure fund of 500 billion euros and debt reforms.

Meanwhile, the president of the ECB, Christine Lagarde, believes that it is too early to predict the impact of German monetary stimulus on the eurozone economy. Lagarde said at the press conference after the policy decision on Thursday that the increase in defense and infrastructure spending remains a “work in progress” and that the ECB “needs time” to understand the impact.

On Thursday, the ECB reduced its deposition ease rate at 25 basic points (PBS) to 2.5%, as expected, but abstained guided on the perspectives of interest rates. This was the fifth reduction of consecutive interest rates of the ECB.

Meanwhile, the sterling pound (GBP) works below the euro, since the member of the Monetary Policy Committee (MPC) of the Bank of England (BOE), Catherine Mann, argued that the economy needs a strong stimulus through a rapid relaxation of policies due to the “substantial volatility” from financial markets, especially of “cross -border collateral effects.”

Contrary to MANN of the BOE, other officials, including Governor Andrew Bailey, favored a gradual monetary expansion cycle, since it is unlikely that inflationary pressures dissipate themselves while they testified before the Treasury Committee of the Parliament.