By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The euro was little changed versus the U.S. dollar on Thursday, the morning after European leaders suspended Greece’s next round of aid pending a referendum on the country’s latest rescue package and as traders awaited the European Central Bank’s first interest-rate decision since Mario Draghi took the helm.
The euro EURUSD +0.37% traded at $1.3748, little changed from $1.3745 in North American trade late Wednesday.
European leaders, meeting in Cannes, France, on Wednesday night ahead of the Group of 20 summit, increased pressure on Athens, saying it was up to the country to decide whether it wants to remain in the euro zone. A referendum is expected in early December, while Greek Prime Minister George Papandreou’s government faces a confidence vote on Friday.
German Chancellor Angela Merkel and French President Nicolas Sarkozy said the disbursement of Greece’s next round of aid from the European Union and International Monetary Fund has been suspended pending Greece’s adoption of the measures agreed by European leaders in a summit last week.
Papandreou’s decision Monday to call a referendum blindsided European leaders and members of his own ruling PASOK party. Amid the turmoil, Mario Draghi is presiding over his first meeting of the ECB’s Governing Council since taking over the top job from Jean-Claude Trichet on Tuesday. Read more about Draghi and the ECB.
Growing recession fears for the euro zone have boosted prospects for a rate cut Thursday or in December, economists said.
“It’s whether Draghi wants to wait a month, settle in and steer markets towards a move — ’Trichet style’ — or cut rates at his first meeting and risk being seen as impulsive,” wrote strategists at FxPro. “We strongly believe that rates should be cut today. The one lesson of the crisis that Europe should have taken on board is that there is no value in waiting.”
The dollar index DXY -0.28% , which measures the U.S. unit against a basket of six major rivals, rose to 77.170 from 77.096.
The British pound GBPUSD +0.28% traded at $1.5934, down from $1.5950.
The dollar USDJPY -0.02% traded at 78.04 Japanese yen, down from ¥78.10.
William L. Watts is a reporter for MarketWatch in Frankfurt.
