The euro produced a stunning rally after European Central Bank President, Mario Draghi, unexpectedly said little to suggest that eurozone policymakers are moving towards an interest rate cut after the ECB announced no changes to its monetary policy.

Draghi also sounded somewhat optimistic about the region’s prospects despite the 17-nation economy being stuck in recession, which seemingly gave traders a clear buy signal for the euro, sending the single currency soaring against the British pound, yen and US dollar.

The euro’s sharp gains compounded the yen’s troubles, with the Japanese currency falling to 1½-year lows against both the pound and euro, after Japan reported a disappointing current account deficit and the Japanese Government unveiled a new fiscal stimulus plan to help revive its faltering economy.

The pound saw little reaction to the Bank of England’s monetary policy announcement, but despite dropping against a broadly stronger euro, cable has managed to open at one-week highs.

Sterling

As expected, the Bank of England left its benchmark interest rate at 0.5 per cent and the size of its quantitative easing programme at £375 billion after concluding its January monetary policy meeting, leaving sterling to track broader currency market developments.

The pound dropped sharply against the euro and other European currencies that track the single currency closely, after the European Central Bank gave very little indication of further interest rate cuts, which most analysts had expected to hear at its press conference. But with the euro also producing its best one-day gain in four months against the US dollar, sterling also took advantage of a weaker US currency and opens at one-week highs against its US counterpart, and also 1½-year highs versus the yen.

Euro

President Mario Draghi caught markets by surprise, revealing a unanimous vote by the European Central Bank to keep interest rates unchanged at 0.75 per cent this month, which sent the euro soaring against its key trading rivals. Most investors had expected the ECB chief to indicate that with the eurozone in recession, policymakers were moving closer to delivering a rate cut to help spur economic activity.

Japanese yen

The Japanese yen fell to 1½ -year lows against the British pound and euro after both the Bank of England and European Central Bank announced no changes to monetary policy in January.