Asian shares edged up on Monday while bond markets held their breath ahead of an update on the U.S. rate outlook from the world's most powerful central banker, and a jobs report that could decide if the next hike needs to be super-sized.
There was some disappointment that Beijing chose to lowball its growth outlook with a target of 5%, rather than the 5.5%-plus favoured by the market, but the recent run of actual data has been strong enough to keep investors optimistic.
Chinese blue chips (.CSI300) slipped 0.5%, having gained 1.7% last week. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was still up 0.7%.
Japan's Nikkei (.N225) climbed 1.2% to a three-month top, while South Korean stocks (.KS11) added 1.0% helped by a softer reading on inflation.
EUROSTOXX 50 futures firmed 0.5%, while FTSE futures held steady. S&P 500 futures gained 0.2% and Nasdaq futures 0.4%, after rallying on Friday as bond yields eased back a little.
Markets have become resigned to more rate rises from the Federal Reserve but are hoping it will stick with quarter-point moves rather than switch back to half-point hikes.
San Francisco Fed President Mary Daly on Saturday reiterated rates would have to go up but set a high bar for moving to half-point increases.
All of which sets the scene for Fed Chair Jerome Powell's testimony to congress on Tuesday and Wednesday, where he will no doubt be quizzed on whether larger hikes are needed.
Much, however, might depend on what the February payrolls report reveals on Friday. Forecasts are centered on a more modest increase of 200,000 following January's barnstorming 517,000 jump, but risks are on the upside.
"Powell's testimony comes before the payrolls and inflation numbers, therefore, he is likely to avoid committing to a policy path," said Jan Nevruzi, an analyst at NatWest Markets.
"Payrolls are due on the final day when Fed officials can publicly discuss monetary policy, but CPI will be released during the blackout period," he added. "If we end up in a situation where the jobs and inflation numbers present a conflicting view, the outcome of the Fed meeting could become even harder to predict."
In an interview released over the weekend, European Central Bank President Christine Lagarde said it was "very likely" they would raise interest rates by 50 basis points this month and the bank had more work to do on inflation.
Australia's central bank is expected to lift its rates by 25 basis points on Tuesday, while the Bank of Canada is seen pausing having raised rates at a record pace of 425 basis points in 10 months.
Friday marks the final policy meeting for Bank of Japan Governor Haruhiko Kuroda before Kazuo Ueda takes the reins in April, and all eyes are on the fate of its yield curve control (YCC) stance.
"No change is expected but we should not completely rule out the chance of Kuroda going out with a bang via the BoJ announcing another tweak to the 0% YCC tolerance band," noted analysts at NAB in a note.
So far, Ueda has sounded dovish on the outlook for policy which has kept the yen on a softer trend. The dollar was last at 135.61 yen after touching a three-month peak of 137.10 last week.
The euro held at $1.0643 , just off its recent seven-week low of $1.0533, while the dollar index was a fraction lower at 104.430 .
Friday's pullback in bond yields helped gold recover some ground and it was trading at $1,855 an ounce .
Oil prices dipped, with investors perhaps disappointed that China did not set itself more ambitious growth targets.
