A 25 basis point cut in the ECB's main rate is widely expected, but investors are waiting to see if the central bank will take other measures, which could include a cut in its deposit rate to encourage banks to lend more of the cash they hold.

"The majority of economists are expecting an ECB rate cut today, but ... one would expect a lot of the good news to be priced in by now," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million of assets.

The euro was little changed around $1.2525 against the safe-haven U.S. dollar, which has gained 0.45 percent against a basket of key currencies .DXY.

The ECB is due to announce its decision at 7.45 a.m. EDT, followed by a news conference by President Mario Draghi.

A Reuters poll of economists showed the majority expect the central bank to cut the main rate by 25 basis points to 0.75 percent, but they were evenly split on whether the ECB will lower its deposit rate.

Draghi's news conference will be closely watched for any hints the ECB could begin buying troubled euro zone bonds again under its securities markets program (SMP), or conduct another long-term refinancing operation (LTRO) to inject funds into the financial system.

The main risk for the markets is that the ECB does very little. "Twenty-five basis points seems to be the consensus, and there's probably going to be some disappointment if (the ECB) don't deliver," one bond trader said.

Ahead of the announcement the FTSEurofirst 300 index of top European shares .FTEU3, which has gained 2.7 percent this week in the face of weak economic data, was up 0.1 percent at 1,046.91 points in early trade.

The MSCI world equity index .MIWD00000PUS was flat at 316.07 points after a quieter session in Asia, where shares outside Japan had hit seven-week highs on Wednesday.

The Bank of England is expected to ease policy at its meeting, also on Thursday, by injecting another 50 billion pounds into the financial system just two months after calling a halt to its previous round of so-called quantitative easing.

The bank's rate-setting committee almost voted for the move last month, and a further round of poor economic data since then plus a fall in inflation is seen as likely to prompt the decision this time around.

DEBT FOR SALE

In a busy day for European government bond auctions, Spain's borrowing costs rose sharply at a sale of 3 billion euros ($3.75 billion) of new debt, which included a 10-year bond.

The auction was the first real test of sentiment toward the recession-hit country since European leaders agreed last week to allow the bloc's bailout funds to buy bonds in the secondary markets and directly recapitalize ailing banks.

The new 10-year Spanish bonds yielded 6.43 percent, sending the yields on its secondary market debt up 15 basis points to over 6.5 percent. The premium investors demand to leave the safety of benchmark German Bunds also rose to 507 basis points.

Italian 10-year yields also rose slightly to 5.83 percent.

France is also holding a much bigger auction of up to 8 billion euros of three different bonds a day after it announced hefty tax rises on wealthy individuals to try to bring its growing budget deficit under control.

Ireland returns to the debt market for the first time since September 2010 with 500 million euros of three-month treasury bills.

Irish yields have fallen to the same levels as Spain's since EU leaders said at the summit last week they would look at improving the terms of Dublin's bailout.

Meanwhile, another troubled euro area nation, Greece, begins the task on Thursday of persuading skeptical lenders to ease the punishing terms of the bailout to save the debt-laden country from bankruptcy.

New Finance Minister Yannis Stournaras was due to meet senior officials from Greece's trio of international lenders - the European Union, European Central Bank and International Monetary Fund - to assess progress on a 130 billion euro ($163 billion) bailout package.

In commodity markets investors were also awaiting the outcome of the ECB meeting, with the weaker growth prospect for the world economy keeping prices under pressure.

Brent crude slipped below $100 a barrel to $99.49, copper was down 0.2 percent at $7,743.75 a metric ton (1.1023 tons), while spot gold was more resilient despite the dollar's strength, managing a small gain to $1,617.95 an ounce.

After Europe's central bank decisions, markets will turn to Friday's key monthly U.S. jobs report for clues over whether the Federal Reserve will take additional easing steps. Non-farm payrolls were expected to see an addition of 90,000 workers in June, with the unemployment rate holding steady at 8.2 percent.

($1 = 0.7994 euros)

(Additional reporting by Tricia Wright.; Editing by Will Waterman)

• A Permanent Economic Emergency