* German GDP weakest in five years
* Sterling in focus before parliament vote, hovers near
* Aussie, kiwi dollar gain versus greenback
* Graphic: World FX rates in 2018 (Adds German data, quote, updates prices)
By Tom Finn
LONDON, Jan 15 (Reuters) – The euro fell on Tuesday after
data showed Germany’s economy slowed in 2018, underscoring fears
about a broader slump in Europe.
Europe’s largest economy is struggling with a cooling of the
global economy and trade disputes driven by U.S. President
Donald Trump’s policies.
An unexpected fall in German industrial output last week
weakened the euro and bred concern about a slowdown and the
European Central Bank’s caution as it tries to wean the region
The German economy grew by 1.5 percent in 2018, the weakest
rate in five years. Soon after the GDP data was released, the euro dropped to a
five-day low of $1.1423. Analysts said that while the figures were in line with
expectations, the gloomy picture added to growing doubts about
whether the ECB will raise interest rates at all in 2019.
"There are increasing concerns about euro zone economic
dynamics, this confirmed those fears and we now expect more
caution from the ECB," said Esther Maria Reichelt, an FX analyst
"In the short-run the biggest risk to Europe and the euro is
a disorderly Brexit which would come at the most inconvenient
time for the German economy," she added.
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 down 0.2 percent against the dollar
at $1.2848 ahead of the vote but remained close to a 2-month
high hit on Monday of $1.2930.
The dollar edged up on Tuesday after days of losses caused
by concern about a global slowdown and expectations of a pause
in Federal Reserve rate hikes this year.
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 strengthened by 0.2
percent to 95.84.
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.
(Additional reporting by Vatsal Srivastava in Singapore
Editing by Peter Graff and Andrew Cawthorne)