GLOBAL MARKETS-Pound up as BoE holds; euro gains in check before ECB decision
* ECB watched for signs of future easing
* Bank of England leave rates policy on hold
* Dollar index at 6-1/2 month highs as recovery strengthens
* European shares inch higher, close to 4-1/2 yr highs
* Spain successfully sells new bonds, yields ease
LONDON, March 7 (Reuters) - Sterling jumped after the Bank of England left its monetary policies unchanged on Thursday, but moves in shares and the euro were held in check as investors waited for the European Central Bank to signal its next step.
Britain's pound, which earlier hit a 2-1/2 year low below $1.50, rose to $1.5045. European shares had gained 0.3 percent by midday, while U.S. stock index futures also pointed to another day of gains on Thursday.
The BoE decision had been forecast, but some in the market had seen a high probability the bank could ease after recent data pointed to the prospect of triple-dip recession, and those expectations have not gone away.
"We still look for more stimulus, given the weak demand story in the UK, but it is more likely to come in May," said James Knightley, an economist at ING Financial Markets.
The euro was slightly firmer but said to be vulnerable to further selling if, as expected, the ECB leaves rates unchanged after its policy meeting but then signals at the following news conference that a future cut is likely.
In the bond market, Spanish and Italian bond yields fell after Madrid's successful sale of 5 billion euros ($6.5 billion) in new debt eased concerns about the impact of the political deadlock in Italy and showed the ECB's promise to support struggling countries continued to underpin demand.
The German Bund future eased 11 ticks to 145.01 after the Spanish bond sale, while the premium demanded by investors to hold Spanish debt rather than safer German bonds eased.
Commodity markets were mostly steady ahead of the outcome of the ECB meetings, with Brent crude up 12 cents at $111.18 a barrel. U.S. crude rose 27 cents to $90.70.
ECB INFLUENCE
Ahead of the ECB decision due at 1245 GMT, the euro had gained 0.45 percent to $1.3030, but dealers said it was susceptible to losses and could retest last week's near three-month low of $1.2966.
"We don't expect anything from the ECB, but a small minority is looking for a rate cut today, and that is partially built into the price," said Adam Cole, global head of FX strategy at RBC Capital Markets.
"If the ECB stays on hold, we could probably see a small bounce in the euro."
The pan-European FTSEurofirst 300 index gained about 0.2 percent to 1,188 points, close to its 4-1/2 year intraday high of 1,193.35 points hit on Wednesday.
Frankfurt's DAX, London's FTSE 100 and Paris's CAC-40 were between 0.1 and 0.4 percent higher.
U.S. DRIVER
The overall looser policy outlook expected from the two major world central banks, along with signs Japan is about to step up aggressive monetary easing, is contrasting with a change in the outlook for the U.S. Federal Reserve
"The Fed is still pumping in $85 billion a month at the moment," said Daragh Maher, currency strategist at HSBC. "But the latest data has forced the idea that the U.S. economy is improving and therefore, going forward, the direction of policy could change."
Investors have been revising their outlook for U.S. growth after a report showed private sector employers are hiring at a faster rate than expected, pointing to lower unemployment, a key condition for the Fed to wind up its massive stimulus programme.
The jobs growth, which followed similarly strong reads on housing and the services sector activity, has also bolstered hopes that Friday's key non-farm payrolls data will surprise on the upside and offset fears that government spending cuts and tax rises would damage the recovery.
Despite weak economic performances in Europe, the UK and Japan, the better outlook for the United States is maintaining support for stocks, leaving the MSCI world equity index little changed on the day ahead of the U.S. open but close to its best levels since mid-2008.
Wall Street shares have been the main beneficiary. The key Dow Jones Industrial index closed at a record high on Wednesday of 14,296.24 points.
American markets have also been drawing support from signs that Congress is about to pass a measure to keep funding the government until the end of September, easing the prospect of an immediate fiscal crisis.