As we close in on the end of Q1, short term German rates are completing a circuitous trip that saw yields pushed higher by a temporary liquidity squeeze related to LTRO repayments only to fall again under the weight of poor economic data. It was an anomoly, a blip. The benchmark 2-yr Schatz is right back where it started the year (and on its 200 day MA) at 0.05%. EURUSD has followed a simliar route; just tagging along for the ride. It's hard to argue much else has mattered. Rates have re-emerged as a major driver of currencies. The ECB may yet cut rates but the reality is that, after such a move, we're back to trading currencies in a ZIRP world and the volatility and wider ranges of the past few months will be a distant memory.
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