As evidence of economic stagnation increases the market is turning its attention to “how long the ECB will be able to keep rates steady,” said Mauro Valle, head of fixed income at Generali Investments. “It cannot be ruled out that the reversal of the monetary cycle may occur sooner than expected.”

Eoin Treacy's view

Germany’s economy is stagnating which is bad news for the EU and the ECB’s efforts to get inflation back under control. The reason the Euro is weak is the ECB is predicting they have done enough to get inflation down but the Federal Reserve has repeatedly said they will err on the side of overtightening because the risk of failing to get inflation under control is too high.

The fact the ECB is still running negative real rates suggests the threat of a wage/price spiral remains credible. Against a background of rising oil prices and uncertainty of supply, monetary officials probably believe they don’t have much choice.