The euro edged lower on Tuesday after data showed the euro zone narrowly avoided a technical recession in the fourth quarter, while the U.S. dollar edged higher, as traders awaited the Federal Reserve's monetary policy decision this week.

Gross domestic product (GDP) in the 20 countries sharing the euro was flat in the fourth quarter against the previous three months, mainly thanks to strong growth in Spain and Portugal and a modest increase in Italy, while the German economy shrank in the final three months of 2023.

The euro was down 0.05% at $1.0827 against the dollar, as expectations are for a stronger U.S. outlook than in the euro zone, which has led investors to fully pricing in a rate cut by the European Central Bank (ECB) in April.

The single currency is down about 2% in January.

Data on job openings from the U.S. Department of Labor Statistics due later on Tuesday will in the meantime offer a prelude to the closely watched payroll report to be released on Friday

The dollar index was 0.04% higher at 103.50 as market participants moved cautiously ahead of the two-day Fed meeting that begins on Tuesday.

With the Fed expected to hold interest rates steady, markets will focus on the tone that Fed Chair Jerome Powell strikes at the press conference on Wednesday and any hints of rate cuts in the near future.

Markets are currently pricing in a 46.6% chance that the U.S. central bank will begin cutting in March, dropping from 73.4% a month ago, according to the CME Group's FedWatch Tool, as data has been reinforcing the view that the U.S. economy remains resilient.

Tuesday's U.S. job opening figures will kick off a week of domestic jobs data, culminating in the January U.S. payrolls report on Friday. The data will give further indications of the state of the world's largest economy.

Sterling slid 0.24% to $1.2678 ahead of the Bank of England's monetary policy meeting this week.

The U.S. currency slid 0.15% to 147.27 against the yen.

Source : Reuters