The euro trimmed losses and rebounded after news that Greece has cancelled the referendum vote on the bailout package.
By not holding the referendum, the bailout deal agreed upon at the EU Summit in Brussels on October 27 will now stay in place.
The euro had tumbled yesterday when the Greek Prime Minister unilaterally announced that he called a referendum on the aid deal. The prospect of putting the package of austerity measures to a public vote had heightened uncertainty about Europe’s future.
This angered European officials who called an emergency meeting in Cannes before the G20 Summit was to begin. French President Nicolas Sarkozy threatened Greece that it will not receive the 6th aid tranche from its international lenders, the “troika” (EU/IMF/ECB), in December if the referendum was held. This would mean Greece would have been at risk of going bankrupt as it would have run out of money by December.
After the announcement of the cancellation of the referendum, the euro rose against the dollar in late North American trading, to hit a high of 1.3834 by 13:20pm New York time from 1.3745. The single currency had earlier fallen after the European Central Bank announced it cut the key interest rate by 25 basis points to 1.25 percent. New European Central Bank President Mario Draghi cited Europe was heading in to “mild recession”.