Wednesday's session brought French and German Manufacturing PMI figures. French private sector activity continued to grow at a strong pace in January, underlining optimism over the economic outlook of the euro zone’s second largest economy, preliminary data showed on Wednesday. The preliminary services purchasing managers’ index improved to a seasonally adjusted 59.3 this month. The reading came in above expectations for 58.9 and up from 59.1 in December. In contrast, the French manufacturing purchasing managers’ index fell to 58.1 this month, missing expectations for 58.7 and down from 58.8 a month earlier.

Private sector output in Germany maintained strong growth momentum in January, fueling optimism over the health of the euro zone's largest economy, preliminary data showed on Wednesday. The preliminary German services purchasing managers’ index rose to a nearly seven-year high of 57.0 this month from 55.8 in December, easily topping expectations for a reading of 55.6 The flash manufacturing purchasing managers’ index declined to 61.2 from a final reading of 63.3 in December. Analysts had expected the index to slip to 63.2 in January.

Thursday's session was marked by German Ifo business data. German business confidence rose unexpectedly in January, a survey showed on Thursday, suggesting that Europe’s biggest continued to fire on all cylinders at the beginning of 2018. The Munich-based Ifo economic institute said its business climate index, based on a monthly survey of some 7,000 firms, rose to 117.6 in January from 117.2 in December. The January reading beat expectations in a Reuters consensus forecast of analysts who had forecast a dip to 117.1. ''The German economy made a dynamic start to the year,” Ifo chief Clemens Fuest said in a statement.

However, the focus of the session was on ECB interest rate decision and the following press conference. Draghi exhibited higher confidence that the ECB would reach its inflation target, yet was extremely cautious in signalling any policy changes ahead. His reluctance to call recent FX moves excessive was still what markets paid most attention to. Further confidence towards reaching the target, policy changes still remote The ECB continued to sound optimistic about the economy. The statement said the strong cyclical momentum, the ongoing reduction of economic slack and increasing capacity utilisation strengthen further our confidence that inflation will converge towards our inflation aim of below, but close to, 2%.

However, the inflation picture continues to be problematic for the ECB. Draghi again emphasized that the central bank needs to have sufficient assurance inflation is converging to the ECB’s target in the medium-term, before it changes policy. Such assurance is currently missing. Draghi said he found it very difficult to see a scenario, where the ECB would hike rates this year. He hinted he still did not expect net asset purchases to end abruptly after September. In other words, the more likely alternatives after September are a gradual tapering or another extension.

This week markets will be looking at:

German Prelim CPI (Tuesday)

Prelim Flash GDP (Tuesday 11:00)

CPI Flash Estimate (Wednesday 11:00)

Spanish Manufacturing PMI (Thursday 9:15)