Wall Street in limbo, investors' indecision

Monday trading on Wall Street was a picture of investors' indecision. Tech stocks gained moderately, with the entire Nasdaq 100 index up 0,34 percent. The S&P500 traded flat and showed no change from its opening level. In turn, industrial Dow Jones fell by 0,4 percent. Markets are still watching the ongoing negotiations on the debt limit and are also assessing the statements of individual Fed officials. It was a boring session.

No agreement

The June 1 deadline is fast approaching. Until then, American politicians have to decide something about the debt limit. There was a Biden-McCarthy meeting yesterday, but despite efforts, no agreement was reached. It was found that the conversation was "productive". The Speaker of the House of Representatives added that it was better than ever before. The politician admitted that he hoped for daily negotiations with the US president until the agreement was sealed. There have been obvious statements that a compromise is necessary to be reached in order to avoid a catastrophic US state default.

Treasury Secretary Janet Yellen continues to comment on the case, warning of the negative consequences. The market doesn't seem to believe that things can go wrong and rather assumes that politicians will find a solution at the last minute, as has happened many times in the past.

Tensions in the banking sector

Market volatility was also not caused by the words of individual Fed officials. Kashkari said it was important for the Fed to signal that tightening is not completeif there is a break in rate hikes in June. He also sees no evidence that tensions in the banking sector are contributing to lowering inflation. Mary Daly of the San Francisco Fed admitted it was too early to say whether the bank would raise interest rates at its next meeting.

Bostic of the Atlanta Fed wants to keep rates unchanged because monetary policy is lagging and he wants to wait for its greater effects. Richmond Fed's Barkin is still open to options in June, but notes that previous interest rate hikes and tightening credit standards amid tensions in the banking sector will cool demand and prices in the near future.

The probability that the Fed will raise the cost of money in June, according to market valuation oscillates around 16 percent. It is clear that investors are now largely basing their expectations on Powell's last words from Friday, which gave a "dovish" signal about no changes. The other words have no effect on them. The dollar did not react which caused that EUR / USD exchange rate still oscillates around 1,08. The strengthening movement was visible on the zloty. USD/PLN fell to around 4,16 and EUR/PLN is below 4,50.

Source: Łukasz Zembik, OANDA TMS Brokers