• Market interpretation of Powell's words indicates caution due to unpredictability of inflation trajectory.
• Friday’s Nonfarm Payrolls report showed a slowdown in annual wage inflation, fuelling predictions for imminent Fed rate cuts.
• NFP report also shows that job creation decelerated while unemployment rose.

The US Dollar Index (DXY) is currently trading near 105, reflecting mild losses in Monday’s session. Headwinds from persistent inflation that remains uncomfortably high, as stated by Federal Reserve (Fed) Chair Jerome Powell, hold the US Dollar steady. That being said, the weak jobs report released last Friday gave clues that the US economy might be signaling that the cooling down the Fed needs to start cutting rates has begun. This may trigger further downside for the USD.

The US economy presents a mixed picture with robust demand and a steady labor market, which saw some weakness in April. Fed Chair Powell's cautious stance, noting the uncertainties surrounding future inflation trajectory and the substantial yet not guaranteed progress, might keep the USD afloat in case future data comes in hot.