The week will likely be dominated by central banks with those from Australia, Japan and Britain joining the Fed in announcing their latest monetary policy decisions. The meeting of the Federal Open Market Committee is the most interesting with speculation mounting that the central bank could cut rates or at least signal an upcoming rate cut amid mounting signals of an economic slowdown in the U.S.
Earlier this month, U.S. Federal Reserve Chair Jerome Powell set off a market rally after he signaled that the central bank is willing to cut interest rates to help stabilize the economy if the trade war between Washington and Beijing starts to slow economic growth.
"It's hard to recall a time we headed into an FOMC meeting with so much at stake and with so much uncertainty about what might be agreed," said Neil Wilson, chief market analyst at Markets.com.
"This means the potential volatility around the event is likely to be substantially higher than at most recent FOMC meetings. Traders may start to show some nervousness ahead of the Fed meeting if they think it won't be accommodative as hoped."
For now, investors are cautious. In Europe, France's CAC 40 was up 0.2% at 5,379 while Germany's DAX was a tad lower at 12,091. The FTSE 100 index of leading British shares was 0.2 percent lower at 7,334. U.S. stocks were poised for modest gains at the open with Dow futures and the broader S&P 500 futures up 0.1 percent.
Earlier in Asia, Japan's benchmark Nikkei 225 inched up less than 0.1% to finish at 21,124.00. Australia's S&P/ASX 200 lost 0.4% to 6,530.90, while South Korea's Kospi edged down 0.2% to 2,090.73. Hong Kong's Hang Seng gained 0.4% to 27,227.16, while the Shanghai Composite was up 0.2% at 2,887.62.
Market watchers are also closely watching the results of the G-20 summit in late June, where U.S. President Donald Trump and Chinese President Xi Jinping could meet and try to negotiate a deal on trade.
"Should Trump and Xi overcome the impasse next week, it's likely that interest rate expectations will change and the Fed may hold off a little longer," said Craig Erlam, senior market analyst at OANDA.
"With that in mind, it would make little sense to cut rates this week."
ENERGY: Benchmark crude oil dropped 53 cents to $51.98 a barrel while Brent crude oil, the international standard, fell 62 cents to $61.39 a barrel.
CURRENCIES: The euro was up 0.2 percent at $1.1231 while the dollar rose 0.1 percent to 108.66 yen.