With US default worries out of the way after senators passed a debt ceiling bill for President Joe Biden to sign following months of wrangling, attention has returned to the central bank's drive to defeat decades-high inflation.
Traders welcomed data Thursday that showed private hiring slowed in May -- albeit at a slower pace than forecast -- and wage growth eased for a second straight month.
The news bodes well for the release later in the day of the more closely followed non-farm payrolls figure, which the Fed uses as one of its crucial guides for its rates decisions.
Monetary policy officials have said a softer labour market and much lower inflation were key to the bank being able to stop lifting borrowing costs.
"Wage-driven inflation may be less of a concern for the economy despite robust hiring," said Nela Richardson of payroll firm ADP, which released Thursday's figures.
"This is the second month we've seen a full percentage point decline in pay growth for job changers."
Expectations were already running high that the Fed will hold its horses on rates for the first time in more than a year when it meets later this month, but comments from two officials added to the optimism.
Philadelphia Fed President Patrick Harker urged policymakers to "at least skip this meeting in terms of an increase".
And Fed governor Philip Jefferson, who has been put forward as a vice chair and who regularly chimes with Chairman Jerome Powell, said holding fire would allow for an assessment of the impact of past rates but not signal a pause.
Analysts said there was now a 24 percent chance of a hike, compared with 69 percent priced in last Friday, while bets on a July increase were also falling.
But some at the Fed remain in favour of another increase, including St Louis Fed boss James Bullard, who thinks rates are in the lower band of where they need to be to tackle prices.
Wall Street and European markets ended with healthy gains, and Asia followed suit on Friday.
Hong Kong led the way, soaring 3.7 percent by the break thanks to a rally in tech firms and after an extended period of losses fuelled by worries over China's opaque economic outlook.
Tokyo, Shanghai, Sydney, Seoul, Taipei and Manila were also deep in positive territory.
"With the core of the (policy) committee seemingly on board with a June skip, the dovish Fed repricing of the June... meeting catalysed a modest move higher in global equities, some dollar weakness, gold upside and even a rally in beleaguered oil markets," said SPI Asset Management's Stephen Innes.
"The good news for risk markets is the Fed seldom, if ever, surprises the market Fed expectation pricing going into a meeting."
- Key figures around 0400 GMT -
Tokyo - Nikkei 225: UP 1.0 percent at 31,450.43
Hong Kong - Hang Seng Index: UP 3.7 percent at 18,883.22 (break)
Shanghai - Composite: UP 0.8 percent at 3,229.06 (break)
Euro/dollar: UP at $1.0767 from $1.0762 on Thursday
Dollar/yen: DOWN at 138.74 yen from 138.79 yen
Pound/dollar: UP at $1.2536 from $1.2525
Euro/pound: DOWN at 85.88 pence from 85.90 pence
West Texas Intermediate: UP 0.7 percent at $70.59 per barrel
Brent North Sea crude: UP 0.7 percent at $74.81 per barrel
New York - Dow: UP 0.5 percent at 33,062.36 (close)
London - FTSE 100: UP 0.6 percent at 7,490.27 (close)
dan/cwl
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