LONDON (Reuters) - European shares and bonds were little changed on Friday in cautious trade before U.S. jobs data, holding onto gains posted the previous day after Europe's two biggest central banks said interest rates would stay low.
The dollar rose and traders said it could test a near three-year high against a basket of currencies that it hit in May if the U.S. payrolls data, due out at 1230 GMT, came out strong.
The figures could either bolster or weaken the case for an imminent reduction of the Federal Reserve's $85 billion a month bond buying programme, triggering turbulence across all major asset classes.
"The market is not expecting a very weak report. Anything from neutral to better ... will be enough to keep markets and investors convinced that the Fed will start tapering," KBC strategist Mathias van der Jeugt said.
Ahead of the data, sterling and the euro were seen vulnerable to testing new lows.
In early European trade the single currency had slipped 0.15 percent to $1.2890, having fallen 0.9 percent on Thursday to hit a five-week low of $1.2883. The British pound struck a five-week low of $1.5026 in Asian trade.
European shares opened slightly higher with the broad FTSEurofirst 300 index up 0.2 percent. It had rallied 2.4 percent on Thursday after the European Central Bank and the Bank of England offered unprecedented future guidance on policy, signalling that they were in no hurry to withdraw stimulus.
Bond markets were mostly steady with Bund futures 4 ticks up at 142.32.
Portuguese bond prices, which have fallen sharply this week, gained after the country's prime minister sought to reassure investors that the government's stability would be maintained.
(Editing by John Stonestreet)