The euro was volatile on Thursday after the European Central Bank cut its inflation forecasts and said further asset purchases may be necessary.
Although the central bank remained bound to its zero-rate policy and kept QE net asset purchases at €60bn a month, it also continued the process of managing expectations towards eventual policy tightening.
Risks broadly balanced
The ECB suggested the risks to growth were "broadly balanced", but revised down inflation forecasts for consumer prices to average 1.5% in 2017 from previous estimates of 1.7%.
These forecasts eventually sent the euro lower, down 0.4% against the dollar to $1.1216 and falling 0.2% to €1.1533 versus the pound.
Only a very subtle change to the central bank's forward guidance was expected and ECB president Mario Draghi altered the language of the bank's statement, removing reference to possible "lower levels" of interest rates.
Additional asset purchases beyond the scheduled December end to the quantitative easing programme were not ruled out, however.
"Draghi seems to have the great power of disappointing hawks when scrapping dovish comments," said Bert Colijn at ING.
Kathleen Brooks, research director at City Index, added: "As it stands, it makes sense that the euro is at fresh lows of the day even though the ECB seems to have adjusted its forward guidance and ruled out the prospect of further rate cuts."
She continued: "This message has been neutralised by the ECB’s reference that it could continue the asset purchases beyond its current end date if the inflation outlook doesn’t improve in the coming months."
Despite Thursday's losses, the euro remained 7.5% higher against the dollar this year.