* Sterling slides vs dollar, euro on UK Q3 GDP shock
* Euro zone data, sterling slide boost euro vs dollar
* UK data casts doubt on prospect of synchronized recovery
(Updates prices, adds comment, changes byline, dateline)
By Steven C. Johnson
NEW YORK, Oct 23 (Reuters) - The dollar and euro rose on Friday against sterling, which tumbled after data showing the UK economy was still mired in recession stunned investors who had expected it to return to growth.
News the British economy shrank 0.4 percent between July and September knocked sterling off a six-week peak against the dollar, causing it to shed more than three cents on the day.
The euro also vaulted higher against the pound, and generally upbeat euro zone data, underlining expectations of a recovery in the third quarter, kept it near a 14-month peak above $1.50, while the UK data quashed hopes the downturn was ending and rekindled talk that the Bank of England will have to extend its emergency asset-purchasing program next month.
"No doubt people will continue now to speculate there'll be more quantitative easing coming down the pipe in November and all of these things are not sterling positive," said Jeremy Stretch, strategist at Rabobank.
The pound was last down 1.3 percent at $1.6407, off a session low of $1.6367 but still far from its six-week peak above $1.6693 touched earlier. The euro rose 1.4 percent to 91.63 pence.
The UK economy's woes cast some doubt on the prospect of a synchronized recovery across world economies, particularly after dovish comments from Swedish and Canadian central bank officials earlier this week.
Sterling's sharp fall helped keep the dollar in positive territory against a basket of currencies. The euro rose 0.1 percent to $1.5035, drawing support from an index of German business morale showing euro zone recovery on track.
In Asian trade, the euro took out option barriers at $1.5050 and peaked at a fresh 14-month high of $1.5061.
YEN PRESSURED, EURO RETAINS MOMENTUM
The euro has appreciated more than 7 percent against the dollar this year, and gains have accelerated in recent months as markets brace for the Federal Reserve to hold U.S. interest rates at record lows well into next year.
Chicago Fed President Charles Evans' said Thursday that the Fed isn't particularly worried about inflation right now but is monitoring it closely.
"The risks continue that we're going to grind higher in euro/dollar and markets will continue to use dips to buy at better levels," Stretch said.
The dollar also rose 0.6 percent to 91.97 yen, a one-month high, as the spread between 10-year U.S. and Japanese government bond yields widened to 210 basis points in favor of the dollar. That makes U.S. bonds more attractive to Japanese investors.
The yen also suffered after Japan's banking minister said the country needed a second extra budget worth around 10 trillion yen, feeding expectations that government debt would rise and a privatization scheme be revised.
Earlier Friday, euro zone purchasing managers indices and the Ifo index of German business morale showed the bloc's economic recovery to be generally on track.
It was something of a mixed bag, however, with the PMIs well above forecasts but the Ifo numbers not quite as robust as analysts had expected.
Boris Schlossberg, director of research at GFT Forex in New York, added that the outlook for the broader euro zone economy also depends on how much stronger the euro gets, which he says could easily break above $1.51 if Wall street gains on Friday.
(Additional reporting by Jamie McGeever and Ian Chua in London) (Editing by Theodore d'Afflisio)