* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh
By Patrick Graham
LONDON, July 21 (Reuters) - The euro's surge to an almost two-year high dominated financial markets on Friday, with most major stock exchanges consolidating after a second strong week of gains while those in mainland Europe dipped.
Investors seem largely to have got over a period of jitters spurred by concerns over the pace of U.S. economic growth and signs that several of the world's major central banks were determined to tighten monetary policy soon.
Thursday's meeting of the European Central Bank did just enough to show euro zone policymakers were on course to rein in their two-year old emergency programme of bond-buying without quite scaring the horses.
The euro surged to its highest against the dollar since August 2015, but government bond yields for Europe's southern governments fell sharply - a reflection of relative confidence in the economic outlook and the cautious line taken by ECB chief Mario Draghi.
Euro zone stock markets, however, were lower on the day .FTEU3 .GDAXI .FCHI , with some analysts worrying a stronger euro may do more to undermine growth going forward.
"We can be pretty sure that when Draghi sat down for his press conference yesterday the last thing he expected to see was the euro hit its highest level in over two years and for equity markets to slide back," said CMC Markets analyst Michael Hewson.
"The strength of the euro does appear to be acting as a bit of a headwind for European stocks as they look to close the week sharply lower, in contrast to the performance of UK and US stocks this week."
The euro gained around 0.2 percent on the day in morning trade in Europe, hitting an almost two-year high of $1.1676. EUR=EBS
Signs of steady global growth, which have prompted the ECB and a couple of other major central banks to signal future tightening since last month, have kept the world's shares on firm footing.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS , which has gained about 5 percent in the past two weeks, eased 0.2 percent, dragged down by a fall in material .MIAPJMT00PUS and financial .MIAPJFN00PUS shares.
Japan's Nikkei .N225 dropped 0.2 percent.
MSCI's gauge of stocks across the globe .MIWD00000PUS was steady after rising for a 10th straight session on Thursday, its longest such streak since February 2015. It has advanced around 3 percent in the latest rally.
"Strong global growth and (a) decent earnings outlook are supporting shares globally," said Tatsushi Maeno, senior strategist at Okasan Asset Management.
U.S. quarterly earnings are expected to have climbed 8.6 percent, above the 8-percent rise projected at the start of the month, according to Thomson Reuters I/B/E/S. About 15 percent of S&P 500 companies having posted results so far.
Brent crude futures LCOc1 traded at $49.31 per barrel, unchanged on day.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Writing by Patrick Graham; additional reporting by Hideyuki Sano in TOKYO and Abhinav Ramnarayan in LONDON; Editing by Andrew Heavens)