Dollar In Stalemate Versus Euro After ECB Cut, Greek Breakthrough
The dollar failed to rally versus the euro on Thursday, even after the European Central Bank unexpectedly cut interest rates.
Later, Greece backed down from a referendum on the region’s sovereign debt bailout plan, fueling hopes that Europe can still avert a full-blown sovereign debt crisis.
The ECB rate hike lifted stocks, raising appetite for riskier currencies like the euro. The news out of Europe overshadowed another lackluster report on the U.S. jobs sector.
For the week ending October 29, the seasonally adjusted level of new claims for unemployment came in at 397,000, a drop of 9,000 from the previous week’s revised level of 406,000.
The dollar slipped to $1.3830 versus the euro, down from this week’s peak near $1.36.
Concerned about the likelihood of a mild recession, the ECB and new president Mario Draghi decided to lower the main refi rate to 1.25 percent from 1.50 percent.
At a press conference explaining the unanimous decision, Draghi said inflation rates are in no danger of breaching the ECB’s 2 percent target in 2012.
Meanwhile, Greece will not go through with a public referendum on the eurozone bailout package, as PM George Papandreou’s opponents in Parliament have decided to go along with the plan.
The dollar slumped to $1.6030 versus the sterling, and eased within a penny of parity against its Canadian counterpart.
There was virtually no movement versus the yen near Y78.
All eyes will be on Cannes, France for the rest of the day, as the Group of 20 meets to address the problems facing the global economy.
China cannot commit to contributing to the enhanced European Financial Stability Facility (EFSF) as there is no sufficient details available on the European Union plan to leverage the bailout fund, China’s Deputy Finance Minister Zhu Guangyao said after meeting with European officials ahead of the G20.
