A hike in US interest rates - potentially the first of many to come - will almost certainly be announced this month, following a string of signals given recently by top Federal Reserve officials.
With market estimates already putting the March hike probability at over 80 per cent, Fed chair Janet Yellen added more to the certainty last Friday when she said that it will be "appropriate" to do so in the upcoming Fed meeting on March 14 and 15.
Before that, the February employment data for the United States, due out this Friday, will be the last major data point to watch.
Bank of Singapore chief economist Richard Jerram does not expect any surprise from the data to derail the impending rate hike.
"This (US jobs data) is a fairly volatile series and January was unusually strong at 227,000 (jobs created), but anything in the 150k to 200k range will confirm the solid recovery that has been evident in a range of other recent releases," he noted.
If US President Donald Trump indeed rolls out fiscal stimulus, "the Fed will be under pressure to respond by raising interest rates more rapidly in order to offer the inflationary impact", Mr Jerram added.
"At the moment, our base case is three rate hikes in 2017 and a further four in 2018, but big tax cuts could speed up the pace."
In Singapore, investors have priced in expectations of a rate hike on financial stocks.
It is commonly accepted that rising US rates will pull up the Singapore interbank offered rate (Sibor) and the swap offer rate (SOR), giving bank loans a better margin and hence better earnings.
This has been part of the reason why DBS Group Holdings, OCBC Bank and United Overseas Bank shares have gained between 6 per cent and 10 per cent so far this year.
But while optimism, in this case, seems justified, it pays to take note of downside risks.
CIMB analyst Jessalynn Chen is among the sceptics.
She said: "We think net interest margins could remain flattish year on year as customer loan yields remain under pressure from competition for high-quality lending to corporates and for mortgages."
Last week, DBS and UOB were seen engaged in a fight for new mortgage sales, offering temporary packages with effective interest rates of as low as 0.6 per cent per annum.
Ms Chen added: "Movements in the US dollar against the Singapore dollar are the key determinant of Sibor and SOR. Market expectations of a gradual 4 per cent appreciation of the US dollar against the Singdollar in 2017 could cap upside to Singapore rates despite higher Fed funds rates."
Bad loans exposure to the oil and gas sector will also continue to dog the banks, with the deepening troubles at Ezra Holdings providing a grim reminder.
The firm has missed the deadline to settle a $4.4 million debt with Forland Subsea, which technically can now apply for a court order and force Ezra to wind up.
The three local banks are believed to have recognised their exposure to Ezra as non-performing loans and had put aside provisions for damage control in the second half of last year.
But Ms Chen urged caution on other oil and gas companies that are seen as particularly vulnerable - characterised by a high net gearing, having outstanding bonds that are due in the near term, and a lack of ties to a deep-pocketed parent.
