European Central Bank (ECB) boss Mario Draghi gave an unexpectedly dovish statement, revealing that his organisation has cut forecasts for both growth and inflation.
Draghi warned that the forecasts could be lowered even further as they were compiled with data gathered before 12 August, and do not take into account the market chaos that has rocked global trading floors in recent weeks.
Given the bearish outlook, Draghi – who was celebrating his 68th birthday yesterday – said that the ECB could decide to boost its €1 trillion (£730bn) asset-purchasing stimulus programme.
“In particular [the ECB] recalls that the asset purchase programme provides sufficient flexibility in terms of adjusting the size, composition and duration of the programme,” he said.
The Italian also said that the ECB will now be able to buy up to one third of any sovereign bond issue it targets – up from a previous ceiling of 25 per cent.
The euro dropped from over 73.5p to 72.7p. Last night, it was trading below the 73p mark, while against the dollar it fell by more than one cent. Draghi’s comments also boosted stock markets, sending equities higher in Europe and across the pond in New York.