* ECB keeps ultra-easy policy firmly on hold
* Dollar slumps to fresh three-year low (Updates throughout to U.S. market open, changes dateline; previous LONDON)
NEW YORK, Jan 25 (Reuters) - The euro surged to a fresh three-year high on Thursday after European Central Bank President Mario Draghi said economic data pointed to "solid and broad" growth with inflation likely to rise in the medium term from subdued levels.
The euro jumped about 1 percent to $1.2536, its highest since mid-December 2014. It was last up 0.79 percent at $1.2504.
Draghi warned that the surge in the euro was a source of uncertainty and said the ECB might have to review strategy if U.S. comments on the benefits of a weak dollar lead to a change in monetary conditions.
The dollar had slipped against the euro on Wednesday after U.S. Treasury Secretary Steve Mnuchin said he welcomed a weaker greenback.
Some market participants had been expecting Draghi to take a firmer stance addressing the euro's potentially damaging surge against the dollar.
"Overall, the comments regarding the exchange rate were benign," said Eric Viloria, currency strategist at Wells Fargo Securities in New York.
"There was a lack of any forceful comments with respect to the recent euro strength," he said.
The dollar index, which measures the greenback against a basket of six major currencies, was down 0.71 percent at 88.575, after dropping as low as 88.438, its lowest since December 2014.
"Some of this USD sell off is now technical in nature, and the trend following crowd is likely pressing the bet a bit," Brad Bechtel, managing director FX at Jefferies, said in a note.
Wells Fargo's Viloria said that from a technical standpoint the dollar index has scope to move lower.
"It remains within an overall downwards trend," he said.
The greenback had already been on the defensive thanks to trade protectionism worries fanned by U.S. President Donald Trump's decision to impose steep import tariffs on washing machines and solar panels earlier in the week.
With a weaker dollar, the yen strengthened despite the Bank Of Japan keeping monetary settings unchanged on Tuesday and Governor Haruhiko Kuroda quashing speculation of a shift away from ultra-easy policy later this year.
Sterling strengthened to its highest levels on a trade-weighted basis since shortly after June 2016's European Union referendum, as optimism around Brexit and the economy continued to fuel a surge in the currency.
Sterling was up 0.42 percent at $1.4301.
The Canadian dollar hit a four-month high against its U.S. counterpart on Thursday as oil prices rose.
(Reporting by Saqib Iqbal Ahmed; Editing by Meredith Mazzilli)