The XAG/USD pair maintained a neutral stance during Monday’s session, hovering near the $24.98 level. This lack of significant movement follows indications of resilience in the US economy, highlighted by recent reports from the Institute for Supply Management (ISM) and the Manufacturing Purchasing Managers’ Index (PMI). The US economy’s robust performance has bolstered hawkish sentiments regarding the Federal Reserve (Fed), resulting in higher US Treasury yields and contributing to a decline in silver prices.
The latest ISM report provided a positive outlook for the US economy, revealing increased business activity in March. The Manufacturing PMI climbed to 50.3, surpassing both forecasts and February’s figures, indicating a notable improvement in economic conditions. Additionally, the Prices Paid Index surged to an annual high of 55.8, reflecting growing cost pressures not seen since August 2022.
This trend of economic improvement may prompt the Fed to reconsider its monetary policy stance. Market reactions were swift, with the probability of a rate cut at the Fed’s June meeting declining from 85% to approximately 65% in response to the enduring resilience of the US economy. The bond market also experienced notable fluctuations, with US Treasury bond yields surging. The 2-year yield rose to 4.71%, while both the 5-year and the 10-year yields reached 4.33%, indicating increased hawkish bets on the Fed.
Looking ahead, investors eagerly await key US labor market indicators such as Nonfarm Payrolls, Average Hourly Earnings, and the Unemployment Rate. These data points are expected to offer valuable insights into the current state and trajectory of the US workforce, providing crucial information for policymakers and investors alike.
