The European Central Bank eased the pace of its interest rate hikes on Thursday but stressed significant tightening remained ahead and laid out plans to drain cash from the financial system as part of a dogged fight against runaway inflation.

Investment bank JPMorgan (NYSE:JPM) ramped up its forecast on Thursday for how high euro zone interest rates will go to 3.25% from 2.50%, after the European Central Bank vowed to keep raising them at a meeting earlier.

The safe-haven dollar held just below the month's high against the yen on Friday and maintained overnight gains versus other peers amid growing worries that continued monetary tightening at the world's biggest central banks could trigger a recession.

Japanese manufacturing activity contracted more than expected in December, preliminary data showed on Friday, as weakening demand further dented productivity, while activity in the services sector improved on a recovery in tourism.

Oil prices were muted on Friday as markets digested hawkish central bank signals and the partial reopening of a key Canada-U.S. pipeline, but were set for strong gains this week on the back of an improved demand outlook for 2023. 

Japanese industrial production was revised even lower in October, data showed on Wednesday, as rising input costs due to elevated inflation and weakening overseas demand weighed heavily on local manufacturing.