ECB's surprise rate cuts send euro tumbling against dollar - UPDATE
The European Central Bank (ECB) decided to surprise markets on Thursday, cutting all its main policy rates.
That follows speculation regarding the prospects for full-blown quantitative easing.
The ECB, under pressure to address weak inflation and a stagnant recovery, cut its main refinancing rate by 10 basis points to 0.05% and the deposit facility by another 10 basis points taking it to -0.20%.
In the run up to the meeting ECB President Mario Draghi had hinted at the possibility of further stimulus measures to boost the euro-area's economy.
"The surprise decision by the ECB to cut its main interest rates today looks like a stop-gap ahead of more powerful stimulus measures to be unveiled in the coming months," Jonathan Loyones, chief European economist at Capital Economics, said ahead of this afternoon's press conference.
The analyst said the cuts reflect the further deterioration of economic data in recent weeks and the fall in inflation.
He said at the margin the changes may have some small positive effect on bank lending and activity and perhaps give the euro another downward nudge.
"But these moves are no substitute for the much more powerful policy action which looks increasingly necessary to prevent a renewed recession," Loyones said.
"As such, we expect President Mario Draghi to drop some heavy hints of further action at the press conference starting at 13:30 BST."
The euro dropped against the dollar to the least since July 2013, falling 0.75% to $1.3051.
RD