To answer the question - Does Microsoft monitor your computer, read this whole passage (source: https://privacy.microsoft.com/en-us/privacystatement):
Finally, we will access, disclose and preserve personal data, including your content (such as the content of your emails in Outlook.com, or files in private folders on OneDrive), when we have a good faith belief that doing so is necessary to: comply with applicable law or respond to valid legal process, including from law enforcement or other government agencies; protect our customers, for example to prevent spam or attempts to defraud users of the services, or to help prevent the loss of life or serious injury of anyone; operate and maintain the security of our services, including to prevent or stop an attack on our computer systems or networks; or
protect the rights or property of Microsoft, including enforcing the terms governing the use of the services - however, if we receive information indicating that someone is using our services to traffic in stolen intellectual or physical property of Microsoft, we will not inspect a customer's private content ourselves, but we may refer the matter to law enforcement.
Microsoft is not allowed to access the files that are only on your local machine. Technically they could implement a function that sends them all your files (something like onedrive synchronization, 
) but someone would definitely notice the high traffic if Windows OS would do so. Your machine would have to open the connection, they can't just open it from outside because of basic networking principles.
I don't think that I have to add something to the legal aspect because the quoted passage explains it pretty well. Of course, there are more limiting words than "good faith belief"... Edit: Here's a report from a German security company about Windows10 privacy stuff and how to configure it. It's written for company admins but it's an interesting and compact read: https://www.ernw.de/newsletter/newsletter-52-february-2016-some-recommendations-regarding-windows-10-privacy-settings/index.html (didn't want to link the pdf download directly).
