Euro slips on German recession fears, sterling steady

LONDON: The euro edged down on Tuesday as investors prepared for German growth figures that could indicate the continent's largest economy went into a technical recession in the last quarter of 2018.

A unexpected fall last week in German industrial output weakened the euro and underscored concerns about a slowdown and the European Central Bank's caution as it tries to wean the region off stimulus.

German exporters are struggling with weaker global demand and trade disputes driven by U.S. President Donald Trump's policies.

Economists polled by Reuters expect figures for gross domestic product (GDP) data due at 0900 GMT to show 1.5 percent growth in 2018. But it is the breakdown of the last quarter of the year that is in focus.

"German GDP will attract more attention than usual this time around given all the talk about recession," said Commerzbank rates strategist Christoph Rieger.

Investors are closely watching sterling with British Prime Minister Theresa May widely expected to lose a vote in parliament later on Tuesday on her Brexit deal.

"Speculators have been betting a failed vote could lead to a possible delay to Brexit from 29 March to July to allow for fresh elections or a second referendum," Philip Wee, currency strategist at DBS, said in a note.

Other analysts expect the pound will take a major beating if May loses the vote by a wide margin since it could push Britain closer to a chaotic exit from the European Union.

Sterling traded flat against the dollar at $1.2871 ahead of the vote, close to a 2-month high hit on Monday of $1.2930.

The dollar slipped on Tuesday as fears about a slowdown in global growth heightened expectations of a pause in Federal Reserve rate hikes.

A shock contraction in Chinese trade and worries over the U.S. economy losing stream have bred fears of a sharp global downturn that would probably see the Fed refrain from tightening monetary policy this year.

That has seen the dollar weaken against its peers by more than 1 percent since the start of the year.

The dollar index on Tuesday weakened by 0.1 percent to 95.48.

Elsewhere, the Australian dollar and kiwi dollar , both considered proxies for global risk appetite, were up 0.2 percent each, having recovered from Monday's lows.

Sentiment was aided by a fresh round of commitments from Chinese policymakers to stimulate their economy though fiscal and monetary steps.