* UK data casts doubt on prospect of synchronized recovery
* Euro zone data shows bloc's recovery generally on track
* Euro holds near $1.50 but retreats from 14-week high (Updates prices, adds comment, adds detail, changes byline)
By Wanfeng Zhou
NEW YORK, Oct 23 (Reuters) - The dollar and euro soared against sterling on Friday after data showing the UK economy was still mired in recession stunned investors who had expected it to return to growth.
The pound shed more than 3 cents against the dollar as it fell from a six-week high after the British government said the economy contracted 0.4 percent between July and September.
The euro also gained against sterling, supported partly by data that suggested the euro zone recovery is gathering pace, but retreated slightly from a fresh 14-month high around $1.5060.
The UK data quashed hopes that the downturn there was ending and rekindled talk that the Bank of England will have to extend an emergency asset-purchasing program next month.
"It was a pretty horrific report from the UK," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York. "The market had been expecting to see all the major economies recover in the third quarter, and this was a bucket of cold water for us."
The pound was last down 1.9 percent at $1.6305
For more on UK GDP, which posted its sixth straight quarter of contraction, the longest stretch on record, see [ID:nLN250789].
For a graphic showing UK GDP growth, click here: http://graphics.thomsonreuters.com/109/UK_Q3GDP1009.gif
Sterling's sharp fall helped keep the dollar in positive
territory against a basket of currencies <.DXY>. The euro was
down 0.1 percent at $1.5012
YEN PRESSURED
The euro has climbed more than 7 percent against the dollar this year, breaking above the psychologically significant $1.50 level this week as markets brace for the Federal Reserve to hold U.S. interest at record lows well into next year.
Late Thursday, Chicago Fed President Charles Evans said the Fed isn't worried about inflation right now but is monitoring it closely.
A survey released Friday showing that sales of previously owned U.S. houses hit a two-year high in September briefly boosted U.S. stocks, but economists say a weak labor market will continue to drag on the economy in the months ahead.[ID:nN2390489]
The dollar rose 0.7 percent to 92.07 yen
The yen also suffered after Japan's banking minister said the country needed a second extra budget worth around 10 trillion yen, feeding expectations of higher government debt.
Earlier Friday, euro zone purchasing managers indexes and the Ifo index of German business morale showed the bloc's economic recovery to be generally on track. [ID:nLN608219].
Nick Bennenbroek, head of currency strategy at Wells Fargo in New York, said the euro's failure to push higher is an indication that "short-term positioning is already very extended." (Additional reporting by Steven C. Johnson; Editing by Andrea Ricci)