Cautious Trading Dominates Markets ahead of Thursday’s ECB Rate Decision and Friday’s EU Summit

Cautious trading dominated European and U.S. markets on Wednesday ahead of the European Central Bank meeting on Thursday, where the ECB is expected to cut the benchmark interest rates by 25 basis points to 1.00%, while investors are also eyeing the EU summit at the end of this week on hopes EU leaders will be able to reach an agreement on a plan to ease the European debt crisis.

Accordingly, investors targeted lower yielding assets, as the level of anxiety continues to build in markets amid some doubts that EU leaders will once again fail to reach a resolution to ease the euro zone debt crisis, and we should expect volatility to continue to dominate markets throughout this week until investors have a better idea of how EU leaders intend to tackle the debt crisis.

The U.S. dollar rebounded to the upside against a basket of major currencies on Wednesday, where the U.S. dollar index was trading at 78.60, compared with the opening level at 78.45. The Euro fell against the Dollar, where the EUR/USD pair traded at $1.3387, compared with the opening level at $1.3409, the British Pound rallied against the Dollar, where the GBP/USD pair traded around $1.5677, compared with the opening level at $1.5602, and the U.S. dollar was little changed against the Japanese Yen, where the USD/JPY pair was trading around 77.73, compared with the opening level at 77.75.

Stocks in the United States were lower by opening on Wednesday, as the Dow Jones Industrial Average was down by nearly 0.55% to trade around 12,081, while the S&P 500 index was down by nearly 0.90% to trade around 1246. European stock indexes were also lower before closing on Wednesday, where FTSE 100 was down by nearly 1.20% to trade at 5501 and the DAX was down by nearly 1.50% to close around 5939.

Gold prices were little changed to trade now around $1728 an ounce and crude oil prices fell after the EUA report showed crude oil stockpiles increased above expectations to trade around $99 a barrel.

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