US manufacturing activity improved, but higher input prices overshadowed the data

Sentiment shifted sour on US manufacturing data. The ISM revealed February’s Manufacturing PMI came at 47.7, below estimates of 48, though it appeared to stabilize, with the prior’s month reading at 47.4. However, the prices subcomponent jumped, reigniting inflation worries amongst investors, as witnessed by US money market futures, with traders expecting rates to climb as high as 5.50%, with no rate cuts in 2023.

A knee-jerk reaction tumbled the XAG/USD from $21.11 to $20.89 a troy ounce. However, Silver’s fall was capped by the US Dollar, which continued to weaken through the US session.

Earlier, Federal Reserve officials crossed newswires and continued their hawkish rhetoric. Minnesota’s Fed President Neil Kashkari (voter) said interest rates should reach 5.4% in December and stay at that level. He also mentioned that he would consider increasing rates by either 25 or 50 basis points during the upcoming Fed meeting.

Later, Atlanta’s Fed President Raphael Bostic commented that rates need to go as high as 5% - 5.25% and stood there “well into 2024.”

The Fed’s hawkish rhetoric did not help the greenback, which, by the US Dollar Index, is down 0.46% at 104.471. Contrarily, the US 10-year Treasury bond yield is advancing seven basis points, eyeing a break above the 4% threshold, a headwind for precious metals prices.