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 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 .STOXX 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 .FCHI was up 0.4%, Germany's DAX .GDAXI gained 0.9% and Britain's FTSE 100 .FTSE 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 .MIAPJ0000PUS crept up to 567.86, just shy of the two-year high of 573.38 it hit last week.

Japan's Nikkei .N225 and Taiwan stocks .TWII rose, led by chipmakers, tracking the rally in the tech-heavy Nasdaq .IXIC on Tuesday, with Nvidia NVDA.O 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 =USD, which measures the U.S. currency against six peers, was slightly higher at 105.78, while the euro EUR=EBS softened to $1.0695.

The yen JPY=EBS 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 LCOc1 0.15% higher at $85.12 a barrel, while U.S. West Texas Intermediate futures CLc1 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. GOL/

Reporting by Samuel Indyk and Ankur Banerjee; Editing by Shri Navaratnam, Himani Sarkar and Alex Richardson

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