LONDON (Reuters) - The dollar rose against the euro and sterling on Friday after the British and euro zone central banks said they planned to keep rates low while commodities fell in nervous trading before a crucial U.S. jobs report.
Traders said the dollar could test the three-year high against a basket of currencies hit in May <.DXY> if the payrolls data came out mildly positive because it would bolster talk of an imminent cut in the Federal Reserve's bond-buying program.
Economists expect the data at 1230 GMT will show 165,000 jobs added last month and the jobless rate ticking down to 7.5 percent from 7.6 percent in May, a Reuters poll shows.
"If we get nonfarm (payrolls) at 165,000, in line, you keep the tapering story in play and you keep the dollar on the front foot," said Daragh Maher, FX strategist at HSBC.
"We're looking at a structurally stronger dollar and the euro would be an echo to that," he said.
European shares steadied and the euro slid 0.2 percent on Friday to a five-week low of $1.2869 after the region's central bank surprised investors on Thursday with a commitment to keep rates low for an extended period.
That promise and the European Central Bank's hint it may cut rates further ended a policy of not commenting on the outlook and has widened the gap between 10-year U.S. Treasury bonds and their German equivalent, which further supports the dollar.
The 10-year Treasury note was yielding around 2.54 percent on Friday compared to 1.67 percent for German Bunds, the widest gap since April 2010.
The British pound eased too after the Bank of England, under new governor Mark Carney, sought to guide rates lower by saying recent rises were "not warranted" by economic developments.
Sterling was near a four-month low against the dollar, dipping below $1.50 to trade around $1.4991.
"Euro and sterling are both reeling after central banks moved to depress short-term rates and said any tightening will lead to a response," said Chris Walker, currency strategist at Barclays.
European shares, which had their best day in 11 months on Thursday on the back of the central bank comments, held onto most of the gains in morning trade but investors were reluctant to do much before the payroll numbers.
For equity investors, any hint in the data of an early end to the Fed's $85 billion monthly spending on bonds has to be offset against the promise of future policy support from two of Europe's biggest central banks.
"It's going to be an interesting day," said Peter Garnry, head of equity strategy at Saxo Bank.
"Anchoring into the future of lower rates from the ECB ... will be positive for equity markets in that region," he said, while strong payroll data "could create a negative reaction in the short term."
Trading in Europe's broad FTSEurofirst 300 index was jittery after gaining 2.4 percent on Thursday and by midmorning the index was little changed <.FTEU3>.
Bond markets were mostly steady as well with Bund futures 5 ticks lower at 142.22, though Portuguese debt recovered some of its losses this week after the country's prime minister reassured investors he could resolve its political crisis.
The firmer dollar weighed on some dollar-priced commodities and gold slipped one percent to $1,236.49 an ounce. Copper was down 1.3 percent at $6,857.75 a metric ton while Brent crude oil dropped 4 cents a barrel to $105.50.
(Additional reporting by Anirban Nag and Toni Vorobyova, editing by John Stonestreet/Ruth Pitchford)
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