* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
* World stocks hit fresh record high
* Euro lifted to 3-year high by ECB; pound, franc follow
* Wall Street set for fresh record, CPI data ahead
* ECB's exit from stimulus: http://reut.rs/2CT37SI (Updates prices, adds U.S. futures)
LONDON, Jan 12 (Reuters) - Record high world stocks headed for an eighth straight week of gains on Friday, while the euro sailed to a three-year high as progress on forming a German government added to signs the ECB may accelerate an end to its stimulus.
MSCI's broadest gauge of the world's stock markets hit yet another all-time high as it bulldozed towards its longest weekly winning streak since 2010.
It has already surged 3.5 percent since the start of the year. U.S. stocks were also set to open 0.1-0.4 percent higher, which should ring in yet more Wall Street records and erase any remaining memory of the short-lived losses seen midweek.
With dollar traders still dazed by the euro's gains over the last 24 hours, the main focus is set to be consumer price inflation data due at 1330 GMT that will further feed the debate on the pace of Fed rate hikes this year.
"This bull market is highly related to the fact we are facing good growth, low inflation and soft monetary policy normalisation," said Jeanne Asseraf Bitton, head of cross-asset research at Lyxor Asset Management. "If any of those were to be shaken that would be a big problem."
Germany's 10-year Bund yield had briefly hit a fresh five-month high of 0.54 percent after Chancellor Angela Merkel's conservatives and the Social Democrats agreed a blueprint for formal coalition negotiations, news that also buoyed the euro.
Germany's DAX gained as much as 0.3 percent with most of Europe following suit but the strength of the euro, which was almost matched by Britain's pound and the Swiss franc, eventually dragged them back to almost flat on the day.
The euro's leap took it as high as 1.2128, the pound was up 0.7 percent at $1.3636 while the franc enjoyed the view from a three-month high of 97.85 cents per dollar.
The euro's overnight index swap rates have risen sharply this week as traders priced in a higher chance of a rate hike early next year.
While the currency's rise has reflected growing optimism over the bloc's economic recovery, investors have flagged it as a potential brake on stocks. Monica Defend, head of strategy at Amundi Asset Management, said the currency, for which she has a target of $1.22, was the biggest risk to European equities.
"COMPLACENT" BOND MARKETS HIT BY ECB
A sell-off in European bonds eased slightly after yields were driven higher by minutes on Thursday of the European Central Bank's December meeting that showed policymakers think it should revisit its communication stance in early 2018.
Lyxor's Bitton said Bund yields were already near to hitting her target for the first quarter. U.S. Treasury were starting to creep higher again too ahead of U.S. trading. They hovered at 2.56 percent having eased back from Wednesday's 10-month high of 2.597 percent.
"Markets were a bit too complacent about bonds so they took some excuses to correct," she said. "We were a little surprised that the market reacted so strongly to the ECB."
The minutes showed that with the euro zone seeing its best growth in a decade, ECB policymakers were considering a gradual shift in its stance to reduce the focus on bond purchases and raise the emphasis on interest rates.
The ECB has pledged to continue its bond purchase programme at least until September, and investors expect any rate hike to take place only next year.
Amundi's Defend said the gradual removal of liquidity from central banks would drive volatility higher across asset classes this year.
"Our target for U.S. 10-year treasuries is 2.8 -- and we might afford up to 3 percent -- but going beyond that it's becoming an alert signal," said Amundi's Defend.
The dollar was firmly in the doldrums too. It was eyeing CPI data due shortly after figures on Thursday showed U.S. wholesale prices dipped in December from November, reinforcing investors' expectations that inflation will remain low.
The dollar index slipped to a six-week low, down 0.5 percent.
Bitcoin fought back 6 percent to $14,000 on the Bitstamp exchange, having fallen 11.1 percent on Thursday after the government in South Korea, a major source of digital currency demand, unveiled plans to ban cryptocurrency trading.
In more mainstream commodity markets, oil prices retreated from 2014 highs hit the previous day, but stayed near three-year highs on signs of tightening supply in the United States.
Brent crude futures hovered at $69.28 a barrel after hitting $70.05 a barrel on Thursday, their highest level since November 2014, while U.S. West Texas Intermediate (WTI) crude futures stood at $63.49, down 0.3 percent on the day.
Investors warned that while rising oil prices were supportive, they could weigh negatively especially on crude-consuming regions.
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(Additional reporting by Marc Jones; Editing by Catherine Evans)