It was a strong day on Wall Street overnight, as investors continued to react to the Federal Reserve's rate pause.

The Dow Jones Industrial Average rose 428.73 points, or 1.26%, to 34,408.06, the S&P 500 gained 53.25 points, or 1.22%, to 4,425.84 and the Nasdaq Composite added 156.34 points, or 1.15%, to 13,782.82.

In tech, shares of Microsoft and Oracle were higher with gains of about 3.2% and 3.5%. Alibaba stock climbed close to 3.2%.

US jobless claims were higher than expected, while sales unexpectedly rose in May as consumers stepped up purchases of motor vehicles and building materials, which could help to stave off a recession in the near term.

The higher jobless claims helped fuel bets that the Fed would not follow through with more rate hikes. 

This, combined with higher-than-expected retail sales, looked like "the ingredients for a soft landing" for the US said Irene Tunkel, chief US equity strategist at BCA Research.

"It's almost like a sweet spot," Ms Tunkel said, also pointing to Chinese data boosting energy stocks and oil prices. "So, sentiment-wise the mood is positive."

In Europe, the euro hit a 15-year peak against the Japanese yen and a five-week high against the dollar after the European Central Bank lifted interest rates to a two-decade high of 3.5% and eyed more hikes ahead.

Equities trading had been choppy on Wednesday after the Fed signalled it could follow its June pause with two more rate increases this year. But on Thursday afternoon the S&P 500 and Nasdaq were rallying sharply and registered their highest closing levels in roughly 14 months.

But the dollar index, measuring the greenback against major currencies, fell 0.787%, with the euro up 1.06% to $1.0946 after earlier hitting a high of $1.09520.

The Japanese yen weakened 0.11% versus the greenback at 140.24 per dollar, while Sterling was last trading at $1.2782, up 0.96% on the day.

"Beyond the near-term outlook for rates, the U.S. dollar may be looking at a somewhat more challenging environment. The global monetary policy cycle is approaching its end game," said Shaun Osborne, chief FX strategist, said at Scotiabank.

Mr Osborne added that the rate-cycle peak would be negative for the dollar as it would boost appetites for riskier bets.

US Treasury yields were lower as investors digested the economic data and the Fed's update.

Benchmark 10-year notes were down 8 basis points to 3.718%, from 3.798% late on Wednesday. The 30-year bond was last down 3.9 basis points to yield 3.8421% while the 2-year note was last was down 6.5 basis points to yield 4.6418%.

- with Reuters