Stock markets rallied on Thursday on hopes that strong earnings will continue with mining companies among the top gainers on the back of a jump in commodity prices.
Short sterling interest rate futures rallied and the pound fell after it was announced that Bank of England Monetary Policy Committee member David Walton, the sole voice calling for a rate increase at the MPC's June meeting, had died unexpectedly on Wednesday evening after a short illness.
The yen also slipped after Bank of Japan Governor Toshihiko Fukui said the bank had made clear that it would not raise interest rates quickly, after comments this week suggested the bank's zero-rate policy might end soon.
Major currencies, though, were largely range bound before next week's Federal Reserve meeting, save for the New Zealand dollar, which shed 1 percent after data showed the country's annual current account deficit widened to record levels in the first quarter.
The market is consolidating ahead of next week's FOMC meeting. It's technical trading, with not much fresh news, said Kamal Sharma, currency strategist at Bank of America.
By 0952 GMT, the euro was down 0.2 percent at $1.2630 after climbing the previous day on reinforced expectations that euro zone interest rates would rise. The dollar was up 0.3 percent at 115.18 yen while the pound was trading at $1.8382.
STOCKS RALLY ON EARNINGS
European stocks rallied in morning trade, boosted by gains in Asia and Wall Street.
The strong round of U.S. corporate results boosted shares on Wall Street on Wednesday, sending the Dow Jones industrial up 1 percent to 11,079.5 points and the Nasdaq Composite up 1.6 percent to 2,141.2 points. The results suggested that the world's largest economy remained robust, sending out positive signals to global equity markets.
U.S. earnings have come out well so far, said Jason Hwang, a strategist at Woori Investment and Securities. That has raised optimism that, going forward, higher U.S. interest rates will not hurt U.S. corporate profits as much.
Miners Antofagasta, BHP Billiton and Anglo American were among the top gainers in Europe, tracking gains in commodity prices.
The dollar's overnight losses helped drive gold up to about $594 an ounce. Copper, an indicator of industrial demand, rose 5.2 percent while crude oil advanced towards $71 a barrel after a smaller than forecast rise in U.S. weekly gasoline stocks on Wednesday.
Elsewhere in Europe, Lafarge rose 3 percent as the French building materials group raised its mid-term targets and said it was considering selling its underperforming roofing business, while Germany's largest insurance group Allianz rose 1.7 percent after announcing plans to cut nearly 7,500 jobs as part of a far-reaching restructuring move designed to boost earnings.
The pan-European FTSEurofirst 300 index was 1.1 percent stronger at 1,290.1 points after a flat performance on Wednesday, and up about 1 percent so far this year.
The strong rebound in global equity markets dimmed the appeal of euro zone government bonds, with Bund futures hitting a five-week low as key technical support gave way.
After falling almost non-stop since mid-January, government bonds won some respite last month as worries global growth would be curbed by rising interest rates sent equity markets into a tailspin.
But bonds have been in retreat for the past week as stock markets have stabilised, encouraging strategists to believe the downtrend will resume.Bonds could well be in thrall to stocks once more, said Andy Chaytor, strategist at RBS.
The September Bund future fell as low as 115.55, before recouping losses to trade at 115.68, down 14 ticks.
Benchmark 10-year Bund yields rose to 4.024 percent, their highest level in more than a month.