LONDON: The euro jumped against the British pound on Thursday, on track for its biggest daily gains in two weeks, after European Central Bank President Mario Draghi poured cold water on those in the market expecting imminent quantitative easing.
Draghi said the bank would assess the case for more stimulus early next year, and signalled the council would be willing to bypass any minority opposition to buying sovereign bonds if it chose to do so.
However, this disappointed some investors who had expected stronger groundwork for QE to be laid on Thursday and had accordingly built bets against the euro.
"Draghi is suggesting that an expanded asset purchase programme could be delivered early next year, with anticipation that this could be in January," said Neil Jones, head of hedge fund FX sales at Mizuho Corporate Bank.
"Some in the market were looking for this month, so disappointment is setting in and causing short covering."
The euro rose 0.8 percent against the pound to 79.10 pence , recovering from a three-week low of 78.32 struck on Wednesday.
Sterling was down 0.1 percent against the dollar at $1.5665 , not far from a 15-month low of $1.5585 hit earlier in the week.
Sterling gave up some gains made on Wednesday, as traders who had initially reacted positively to British finance minister George Osborne's latest fiscal statement looked more closely at negative aspects including a cut to longer-term growth forecasts.
While Osborne, in his Autumn Statement on Wednesday, raised growth forecasts for Britain's economy for this year and 2015 and offered tax cuts, he also said the government would miss its budget deficit goals and the Office for Budget Responsibility -- the fiscal watchdog -- lowered its economic growth forecasts for 2016-2018.
"If the market is convinced that the growth profile for the UK going forward is going to be lower because of further fiscal austerity measures, that's going to take the shine off of sterling," said Ian Stannard, head of European FX strategy at Morgan Stanley.
Stannard said he had revised down his forecast for sterling to $1.45 by the third quarter of 2015, as uncertainty over the outcome of next year's general election and lower growth weigh on the currency. Following a rate hike that Stannard expects in November 2015, the pound would rebound to $1.47.
UK rate forecasts have been pushed back dramatically over the past few months, with some now not expecting a hike until early 2016. That pushing back of expectations has helped send sterling down almost 9 percent since it hit a six-year high near $1.72 in July, when many were expecting a 2014 hike.
Earlier in the day, Bank of England kept rates unchanged at 0.5 percent.
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