Silver (XAG/USD) slipped to a weekly low near $22.70 following the Federal Reserve’s (Fed) announcement of a neutral interest rate guidance during its March monetary policy meeting. Despite expectations, the Fed maintained interest rates in the range of 5.25-5.50%, but the postponement of rate cuts in March weighed on precious metal prices.
The divergence in market reactions is evident as S&P500 futures showcase positivity, while risk-associated currencies face headwinds. The absence of a specified timeline for rate cuts in Fed Chair Jerome Powell’s monetary policy statement impacted these currencies adversely. Simultaneously, the US Dollar Index (DXY) strengthened, reaching close to 103.80, as the Fed refrains from speculating on rate cuts until there is greater confidence in inflation sustainingably returning to the 2% target.
Investors now turn their attention to the Institute of Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) for December, scheduled for release at 15:00 GMT. According to consensus estimates, the Manufacturing PMI is anticipated to decline to 47.0 from the previous reading of 47.4.
Looking ahead, the spotlight remains on the upcoming Nonfarm Payrolls (NFP) data for January, set to be unveiled on Friday. The recently released ADP Employment Change data, published on Wednesday, has already set a cautious tone for the official labor market figures. The data indicated that US employers hired 180,000 job-seekers, a significant drop from the previous payroll additions of 216,000. Additionally, the Unemployment Rate is projected to rise to 3.8%, compared to the 3.7% recorded in December.*
As uncertainty looms over economic indicators, market participants are closely monitoring these key data points to gauge the overall health of the US economy and anticipate potential impacts on silver prices in the coming weeks.
