European Central Bank President Mario Draghi. has surprised investors by unexpectedly cutting its key interest rate to 0.05 per cent and its deposit rate at -0.2 per cent.
Within minutes of the announcement the euro had weakened against the dollar to $1.3076 and European government bond yields fell, with the yield on the German bond declining to 0.92 per cent.
Since reaching a recent high of almost $1.40 in early May, the single currency has been weakening on expectations that an anaemic recovery and tepid inflation will force the ECB to inject more stimulus.
European government bond yields had also lurched lower in recent weeks, with the yield on the ten-year German bund falling as low as 0.88 per cent.
Expectations that this ECB meeting could prove an important one were raised last month when Mr Draghi publicly voiced his concern of sliding inflation expectations in the Eurozone.
Attention will now turn to the Mr Draghi’s press conference at 1:30pm London time.
