FOREX-Euro, sterling rally as Europe pledges to rescue banks

* Euro rallies as European governments agree to bank rescue

* Sterling up as UK details bank bailout plan

* Global stocks rise, Wall Street points to rally (Adds details, updates prices, adds comment, changes byline, dateline)

By Steven C. Johnson

NEW YORK, Oct 13 (Reuters) - The euro surged on Monday after a unified European government plan to rescue banks from collapse helped the currency sprint away from a 1-1/2-year low against the dollar.

Sterling also rose against the dollar after the British government said it would pump $64 billion into three of its biggest banks, part of a plan to restore confidence in what has become the worst global financial crisis since the 1930s. For details, see [ID:nLD167263]

European shares surged .FTEU3 and Wall Street was headed for a rally as signs of looser credit conditions led investors to take on more risk after running for the hills on Friday.

Germany approved a 400 billion euro rescue plan on Monday, and the French government was set to create a $55 billion fund to take stakes in its banks, media reports said. [ID:nLC11122]

The bank bailout "is the first positive step in the right direction and demonstrates the ability of officials to act in concert, which should provide the euro with a boost of confidence for the time being," said Boris Schlossberg, director of research at GFT Forex in New York.  Continued...