The CME Group FedWatch Tool shows that markets are pricing in a more than 60% probability of the Fed raising its policy rate by 25 basis points (bps) in May.
On Sunday, Saudi Arabia announced that several producers in OPEC will participate in voluntary output cuts from May to the end of the year. The group’s total output will be reduced by more than 1 million barrels per day in that period.
The barrel of West Texas Intermediate (WTI) opened with a large bullish gap and touched its highest level since late January above $82.
The ISM Manufacturing PMI survey is forecast to show ongoing contraction in the business activity of the United States (US) manufacturing sector in March.
Prices Paid Index of the PMI survey is expected to 53.8 in March from 51.3 in February.
Previewing the ISM survey, “if the headline figure beats estimates, the US Dollar would rise and stocks would decline as investors would give a higher chance to a rate hike in May,” said FXStreet Analyst Yohay Elam. “However, any such move would be short-lived. Even if the Fed were to raise borrowing costs next month, it would probably be the last.”
NY Fed President John Williams reiterated on Friday that the Fed’s policy decisions will be driven by the incoming data and the progress toward employment and price stability mandates.
Later in the week, the ISM Services PMI survey, ADP private sector employment data and the US Bureau of Labor Statistics’ March jobs report could influence the USD valuation.
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