The euro opened at 1.2315 at 8:30 am in New York having slipped below 1.2300 briefly to 1.2296 just after the European open. After that it remained penned to a narrow 1.2296-1.2435 range in front of the ECB policy announcement and Mario Draghi news conference.
The main ECB refinance and deposit rates were unchanged as expected and without market reaction. Mr Draghi's policy statement and press conference was another story.
The euro initially spiked to a new low of 1.2880 at the start of prepared text, but then reversed sharply higher as it became clear that sovereign debt purchases would be delayed until sometime in the first quarter at the earliest. The euro climbed quickly to 1.2415, fell back to 1.2342 and then resumed its advance to 1.2456 just before the London close.
Even though the ECB lowered its forecasts for inflation and economic growth for this year and the next two, it was clear thta Mr Draghi does not have the votes on the governing council to carry his quantitative easing policy. Mr. Draghi does not require a unanimous vote to enact his policy but it would be very risky for the bank to begin QE over the objections of Germany.
The lack of a firm committment and timetable for liquidity provisions ignited a short covering rally that was probably abetted by considerations for profit into the end of the year.
The rate was already drifting lower around 1.2420 when a headline that "ECB [was] preparing broad based QE package for January" jolted the market into a sharp move to 1.2362.
The euro recovered to close at 1.2379.