Investing.com - The euro dropped against the dollar on Tuesday after sluggish European data stoked market expectations for the European Central Bank to roll out fresh stimulus measures to spur recovery.
In U.S. trading, EUR/USD was down 0.73% at 1.2658, up from a session low of 1.2640 and off a high of 1.2769.
The pair was likely to find support at 1.2604, last Friday's low, and resistance at 1.2762, Monday' high.
The ZEW Centre for Economic Research reported earlier that its German economic sentiment index fell to -3.6 this month from September’s 6.9 reading. Analysts had expected the index to come in at 1.0 in October.
The index of euro zone economic sentiment plunged to 4.1 in September from 14.2 in August, well below expectations for a decline to 7.1.
A separate report showed that eurozone industrial production contracted 1.8% in August from July, outpacing expectations for a 1.6% decline. July's figure was revised to a 0.9% rise from a previously estimated 1.0% increase.
Year-on-year, industrial production fell 1.9% in August, surpassing expectations for a 0.9% decline and after rising at a rate of 1.6% the previous month.
European Central Bank President Mario Draghi has said monetary authorities will do what it takes to steer the continent away from deflationary declines, and Tuesday's data sparked expectations that further stimulus measures may be needed to kick-start the economy.
Elsewhere, the euro was up against the pound, with EUR/GBP up 0.26% at 0.7949, and down against the yen, with EUR/JPY down 0.45% at 135.63.
The pound suffered after data revealed that U.K. inflation slowed to a five-year low last month.
The U.K. Office for National Statistics reported earlier that the year-on-year consumer price index slowed to 1.2% last month from 1.5% in August. Analysts had expected U.K. CPI to fall to 1.4% in September.
Month-over-month, consumer price inflation came in flat in September after rising 0.4% in August.
Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at a rate of 1.5% last month, down from 1.9% in August. Analysts had expected core prices to rise 1.8% in September.
Markets were also jittery amid the widening Ebola epidemic, as the U.K. announced on Monday that it will begin conducting fever tests for Ebola at Heathrow airport.
On Wednesday, the U.S. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. The country is also to report on producer prices and manufacturing activity in the New York region.