LONDON (Reuters) - The euro was at a one-week high and European shares extended their gains on Thursday as the appetite for risk assets improved on signs Europe will find a way to deal with Spain's banking crisis and the United States could embark on monetary stimulus.
The positive mood will get an early test when Spain auctions up to 2 billion euros of new bonds, though the small size of the sale should ensure its success.
The single currency stood at $1.2555, about 2.3 percent above a two-year low of $1.2288 hit last week.
The euro zone's blue-chip Euro STOXX 50 index rose 0.3 percent to 2143.69 points, a gain of 3.5 percent this week that puts it on track for its best week since mid-March.
The extent to which the current rally in riskier assets continues in the near term is likely to depend heavily on Fed Chairman Ben Bernanke's testimony to a congressional committee later on Thursday, which could provide hints on the possibility of further monetary easing.
There will also be a lot of focus on the Bank of England's decision after its regular policy setting meeting, with many in the market speculating that a slump in British manufacturing activity could see the central bank opt for more economic stimulus.
