While investors obsess over what the world's biggest central bank might do next, the uneasy calm prevailing in global markets is under threat.
First, Russia has edged closer to default after the United States said it would not extend a waiver that had allowed Moscow to pay U.S. bondholders.
Second, North Korea likely fired an intercontinental ballistic missile on Wednesday, hours after U.S. President Joe Biden ended his trip to Asia.
And in Britain, a report by senior civil servant Sue Gray into lockdown-breaking events in Downing Street may be published later in the day, heaping more pressure on Prime Minister Boris Johnson, who is facing a sharp slowdown in the UK economy.
For now, markets seem to be overlooking these developments. Asian stocks inched higher while European and U.S. equity futures are in the green, primarily due to a pullback in U.S. Treasury yields, where 10-year borrowing costs are near the lowest in nearly a month.
But that fall is down to a raft of lacklustre PMI and housing data that points to a cooling economy.
On currency markets, the New Zealand dollar was the standout gainer, following a 50 basis-point (expected) interest rate rise and a more hawkish tone than expected from the central bank.
The U.S. dollar remains just off one-month lows, as the weak dataprints forced traders to dial back some of their aggressive bets on monetary tightening. Money markets now see around 131 bps of rate hikes over the next three meetings, down from 145 bps at the start of the week.
And Atlanta Fed President Raphael Bostic sounded a warning that headlong rate hikes risked "significant economic dislocation". Markets will watch now for minutes from the Fed's last meeting, due later on Wednesday.
Key developments that should provide more direction to markets on Wednesday:
-Speakers' corner: ECB President Lagarde, Rehn, Panetta, Holzmann, de Cos and Lane, BoJ Governor Kuroda, Fed Vice Chair Brainard and BoE policymaker Tenreyro.
Data: U.S. April data on durable goods orders and core capital goods orders.
TotalEnergies agrees to buy 50% of U.S. renewables company Clearway
(Reporting by Saikat Chatterjee; editing by Sujata Rao)