European shares were at a seven-year high and the euro sat near an 11-year low on Thursday as the European Central Bank prepared to take the plunge into full-scale quantitative easing.
The ECB left its main interest rates at an all-time low but said it would announce "further monetary policy measures" at its 1330 GMT news conference.
Market expectations are sky-high for the bank to unveil a large-scale QE programme - printing money to buy euro zonegovernment bonds - despite opposition from Germany's Bundesbank. Berlin is also worried that such purchases may allow spendthrift countries to slacken the pace of reforms.
A euro zone source said on Wednesday that the bank's Executive Board, which met on Tuesday, has proposed the ECB should buy 50 billion euros ($58 billion) of bonds each month from March, although it was unclear how long for.
Markets have been pumped up by almost a year of speculation over the issue, and investors were happy to sit and wait for the actual details.
German and other euro zone bond yields nudged up as investors locked in some profits on a recent sharp rally, while the region's shares and the euro inched up to 1,434.40 points and just over $1.1630 respectively.
"The key market focus is likely to be on two things," said analysts at Goldman Sachs. "(i) the scale and maturity profile of the programme and (ii) whether the ECB chooses to 'mutualise' the risk on its own balance sheet or place assets on national central banks' balance sheets."
Broader market sentiment remained positive for riskier assets, supported by the aggressive actions of central banks seeking to fight deflation and avoid losing out in what is fast becoming a global currency war.
Canada's dollar hit a six-year low after it became the latest country to surprise by cutting rates on Wednesday, while there was chatter that countries like Denmark may opt to move again if the ECB announces a big QE programme.
The ECB has already cut interest rates to record lows, begun buying private sector assets and funnelled hundreds of billions of euros of cheap loans to banks, in the hope that they would lend the money on into the economy and stimulate growth.
Its last remaining major option is QE, a policy that the U.S. Federal Reserve, Bank of England and Bank of Japan have all used with some success.
CHOPPY HOURS AHEAD
European shares were hoping to make it a sixth successive day of rises. With U.S. futures pointing to positive start for Wall Street ahead of another busy day of company earnings and macro data, MSCI's 45-country world index was eyeing a fifth day of advances.
The euro drifted gradually higher, floating between $1.1610 and $1.1640 to move away from an 11-year nadir of $1.14595 plumbed last week as the market trimmed short positions ahead of the ECB QE plan.
Traders though were braced for volatility in the next few hours given how long markets have been preparing for the central bank to take the plunge into bond buying.
Banks like Goldman are expecting the euro to eventually reach parity with the dollar, but low global inflation is now pushing back bets on the first U.S. rate hike. That's on top of the nerves about QE and Greece's elections at the weekend where the anti-EU/IMF bailout Syriza party lead the polls.
"It could be so volatile, we could trade four big figures on euro/dollar," said NationalAustralia Bank strategist Gavin Friend. "There is so much potential for confusion and for it (QE) to be watered down."
Europe's central banks have also been heavily strained by the prospect of ECB QE. The SNB was forced to remove its currency cap last week, Denmark has pushed its interest rates deeper into negative territory, while two British rate setters at the Bank of England have dropped calls for a rate hike.
The Australian and New Zealand dollars suffered deep losses overnight as Canada's latest shock rate cut fuelled speculation the Reserve Bank of Australia could soon follow.
The Aussie fetched $0.8106, having shed more than 1 percent in Sydney. That had pulled it closer to a six-year trough of $0.8033 set earlier in the month, while the kiwi tumbled to a 2-1/2 year low of $0.7516.
Crude oil prices and gold were also being dragged around by expectations ECB bond-buying stimulus could boost growth but also the dollar which would put downward pressure on commodity markets.
Brent crude futures nudged up to $49.5 per barrel and U.S. crude was up 39 cents at $48.20 a barrel.
The dollar meanwhile dipped against a basket of currencies and to 117.75 on the yen. Japan's central bank had also been in action earlier and signalled its resolve to hit its ambitious 2 percent inflation target.
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