(Updates at 0827 GMT)

By Samuel Indyk and Ankur Banerjee

LONDON, June 26 (Reuters) - European stock markets were

higher on Wednesday as the market braced for a French election

and a key U.S. inflation reading, while the yen lurked just shy

of 160 per dollar level, keeping traders on alert for possible

intervention.

Risk sentiment in Europe was broadly positive after a

rebound in Nvidia ( NVDA ) shares on Tuesday, following three straight

days of selling, and as investors focus on the monetary policy

outlook and the prospect of further rate cuts.

"Fears of a big imminent market wobble are now receding,"

said Susannah Streeter, head of money and markets at Hargreaves

Lansdown.

Markets are still sensitive to risks before the first round

of voting in the French legislative election on Sunday, but

remained focused on monetary policy where further interest rate

cuts from the European Central Bank this year seem likely.

"The key driver for markets today is all around central

banks and a close second is political uncertainty," said Nathan

Sweeney, chief investment officer of multi-asset at Marlborough.

"If you think about Europe in general, the ECB has started

the rate-cutting journey. Companies are very sensitive to

interest rates so it can really help to bolster their earnings."

The pan-European STOXX 600 was last up 0.5% to its

highest level since June 13, shortly after French President

Emmanuel Macron announced the snap election.

France's CAC 40 was up 0.4%, Germany's DAX

gained 0.9% and Britain's FTSE 100 rose 0.6%.

Money market traders are pricing in around 45 basis points

of further easing from the ECB this year, implying almost two

more quarter-point rate cuts, following a 25 bps move earlier

this month.

ECB policymaker Ollie Rehn said bets for two more rate cuts

this year were "reasonable".

U.S. equity futures edged higher, while MSCI's broadest

index of Asia-Pacific shares outside Japan crept

up to 567.86, just shy of the two-year high of 573.38 it hit

last week.

Japan's Nikkei and Taiwan stocks rose, led

by chipmakers, tracking the rally in the tech-heavy Nasdaq

on Tuesday, with Nvidia ( NVDA ) surging more than 6%,

snapping out of a three-session tailspin that had erased about

$430 billion from its market value.

On the U.S. monetary policy front, Federal Reserve officials

urged patience on interest rate cuts, with governor Lisa Cook

saying the central bank was on track for a rate cut if the

economy's performance met her expectations. But Cook declined to

say when the Fed would be able to act.

Fed Governor Michelle Bowman reiterated her view that

holding the policy rate steady "for some time" would probably be

enough to bring inflation under control.

The comments, along with data showing a stable housing

market, kept expectations in check over when and by how much the

Fed would cut rates.

"(The) worst thing the Fed could do is ease and then the

data continues to firm the inflation numbers back around," said

Rob Carnell, ING's regional head of research for Asia-Pacific.

Markets were pricing in 47 basis points of easing this year,

with a rate cut in September pegged at 66% probability, CME

FedWatch tool showed.

Traders await Friday's release of the U.S. personal

consumption expenditures (PCE) price index, the Fed's preferred

inflation measure, with economists polled by Reuters expecting

the annual growth to ease to 2.6% in May.

AUSSIE SURGES, YEN TEETERS NEAR 160

In the currency market, the Aussie rose more than 0.5% to as

high as $0.66885 after hotter-than-expected inflation data,

leading markets to narrow the odds on another rate hike as early

as August.

The dollar index, which measures the U.S. currency

against six peers, was slightly higher at 105.78, while the euro

softened to $1.0695.

The yen was fetching 159.88 per dollar and has

been trading in tight ranges as it stalks the crucial 160 level

that some traders say might bring about another round of

intervention.

The yen touched a 34-year low of 160.245 per dollar on April

29, prompting Tokyo to spend roughly 9.8 trillion yen in late

April and early May to support the currency.

The latest slide in the yen has come in the wake of the Bank

of Japan's (BOJ) decision this month to hold off on reducing

bond-buying stimulus until its July meeting.

The BOJ though is dropping signals that its quantitative

tightening plan in July could be bigger than markets think, and

may even be accompanied by an interest rate hike.

In commodities, oil prices rose, with Brent futures

0.15% higher at $85.12 a barrel, while U.S. West Texas

Intermediate futures were up 0.26% at $81.03 per barrel.

Gold prices eased to $2,313 per ounce, but remain up 12%

this year, having touched a record high of $2,449.89 last month.