Investors hold fire and eye ECB, BoE and U.S. jobs data

The dollar was firmer against a basket of currencies after a trend-breaking rally on Wednesday when U.S. data beat expectations. An ADP report showed the U.S. adding jobs.

A second day of upbeat earnings from Europe's banking sector saw Germany's Commerzbank raise its outlook after a forecast-beating second quarter. Barclays of the UK beat expectations with a 44 percent rise in half-year profit as bad debts dropped, but it made a big accounting gain, offsetting a second-quarter slowdown at its investment bank.

Investors were also looking ahead to U.S. non-farm payrolls jobs data due on Friday against the backdrop of an apparent U.S. economic hiccup considered a major threat to the global recovery, even if China and some others can take up part of the slack.

Corporate earnings will keep helping the market for some more time, but if macroeconomic numbers are going to take over, then good earnings will not be enough to support the market, said Koen De Leus, economist at KBC Securities.

Nervousness is now about the U.S. jobs data as expectations of the markets are really linked to these numbers. If they are better than expected, then concerns of a double dip will fade very fast. If that's not happening, then we might see a correction.

MSCI's all-country world stock index <.MIWD00000PUS> and the Thomson Reuters global stock index <.TRXFLDGLPU> gained about 0.2 percent.

The FTSEurofirst 300 <.FTEU3> was flat.

Earlier, Japan's Nikkei <.N225> closed up 1.7 percent, helped at least for a while by top carmaker Toyota Motor Corp <7203.T> reporting its best operating profit in two years, beating market estimates, and lifting its cautious forecasts despite a sluggish U.S. recovery.

DOLLAR FIRMS

The European Central Bank and the Bank of England are both expected to leave interest rates on hold at record lows of 1.0 percent and 0.5 percent respectively.

Analysts said ECB president Jean-Claude Trichet may be upbeat in a subsequent news conference, given recent successful bank stress tests and a run of solid European bank earnings.

But Friday's U.S. jobs report was the main factor.

Today will be all about squaring of short dollar positions ahead of Friday's payrolls numbers as no one will want to be short of dollars if there is a positive outcome, said Niels Christensen, currency strategist at Nordea.

The dollar index <.DXY> rose 0.1 percent to 80.977, off its recent low of 80.469, its weakest since mid-April, while the euro fell 0.3 percent to $1.3123.

Euro zone government bonds were little changed ahead of the ECB meeting.

(Additional reporting by Jessica Mortimer and Atul Prakash; Editing by John Stonestreet)