The US dollar outperformed other major currencies in trading on Wednesday (May 17). It was until the Dixie reached its highest level in the last six weeks. 

Two main factors play an important role On this situation. First, interest in buying safe-haven assets increased amid continued negotiations on the US debt ceiling. 

Second, the hawkish bias has strengthened due to recent statements by several Fed officials. The results of the last FOMC meeting signaled the Fed's intention to stop their interest rate hike cycle.

For The information, that cycle has lasted for ten consecutive times. A number of market participants then expect the Fed to keep interest rates on hold for several months, then cut them by the end of this year. 

Economy Showed the Tentative Weakness 

Speculation about the rate cut was rife for some time, but now it is sold out because of the hawkish attitude of Fed officials. Four top Fed officials said earlier this week that they expected inflation to remain high. 

They also said that the economy showed only signs of tentative weakness. Therefore, interest rates need to be maintained at a high level. 

The Chicago Fed President, Austan D Goolsbee, said it was "too early to discuss rate cuts". Meanwhile, the Cleveland Fed President, Loretta Mester, even hinted that interest rates may need to be raised again.

The reason is, Mester assesses the United States labor market is still tight. Besides that, there is also no adequate evidence about a decrease in inflation. 

Result of the Reuters Survey about Rate Hike 

The results of a Reuters survey of economists conducted May 11-16 showed the interesting fact. It showed that 75 of 116 respondents expect the Federal Reserve to remain at its current level until the end of 2023. 

A total of 14 respondents expect the interest rates to rise again this year, with three predicting one hike and one cut before the end of the year. Only 30 respondents think the rate hike is over and the Fed will cut interest rates by at least 25 basis points.

Simply put, inflation is currently more than double the Fed's target. Meanwhile, the unemployment rate is below all FOMC participants' estimates of natural rates. 

These facts are the signal that the Fed's bias will be skewed toward raising rates rather than cuts. This was said by Michael Gapen, a chief U.S. economist at Bank of America. 

Risks may Have Negative Effect for the Macroeconomic 

Elsewhere ,The Reuters survey also showed 22 of 41 respondents think there is a greater risk of default in the American debt ceiling negotiations today than in years past. 

A total of 16 respondents of that survey rated the risk the same, and only three respondents thought the risk of default was lower than before. This increased concern over default risk could have negative consequences for the macroeconomy.

That is as well as increasing the United States Treasury in some weeks ahead. Meanwhile, Gold prices fell again in the trading session on Wednesday (17/May) night.

The Spot gold lost by 0.7% to $1,975.70 an ounce. Furthermore, the gold futures slipped by 0.5% to $1,983.90. The XAU/USD chart shows a 0.4% drop in this precious metal prices to $1,980.20.

Gold Price Move Away Further 

The US Dollar surge on hawkish statements by Fed employees caused gold prices to move further away from the $2,000 level. The USD index, which hit a six-month high, also eroded the appeal of bullion.

This has so far been a competitor to the dollar as a safe haven. The U.S. Dollar jumps, particularly those driven by the Fed officials in general, tend to be all hawkish. 

It is a burden on the precious metals market as stated by Jim Wyckoff, a senior analyst at Kitco Metals. In addition, although the American debt default could be bullish for gold, most marketplaces expect that not to happen.