Events in the world's biggest economy will likely take center stage in Asia's financial markets this week, with the Federal Reserve's monetary policy decision and the U.S. second-quarter growth report card on tap.
"The key event is without dispute the FOMC [Federal Open Market Committee] decision on Wednesday. While almost no one is expecting the Fed to raise interest rates in its July meeting, everyone is watching for their comments, particularly on the economic and inflation outlook," IG's market strategist Bernard Aw wrote in a note released on Friday.
Aw believes that the world's most influential central bank is poised to raise rates from near zero this year, as U.S. jobs data improve and global risk events, namely Greece and China, subside. However, caution may be warranted with inflation remaining stubbornly lower than the central bank's targeted 2 percent rate.
"There are some concerns that the strengthening dollar is dampening inflationary pressure, which would cloud the Fed's judgement on when to raise rates. Nonetheless, Fed chair Yellen remains adamant that the central bank will start normalizing interest rates this year, although increases will be gradual," the Singapore-based strategist added.
The release of U.S. second-quarter gross domestic product (GDP) on Thursday will also be a key swing factor for risk appetite. According to economists polled by Reuters, the world's top economy likely grew 2.50 percent in the April-June period, regaining strength after expanding a meager 0.2 percent in the first three months of 2015 on the back of bad weather and softer energy prices.