January 16, 2019 / 9:17 PM / 3 months ago

FOREX-EU worries lift dollar, pound steady after UK no-confidence vote

* UK PM May wins confidence vote, boosting pound

* Poor German data, Draghi warning, weighs on single currency

* GRAPHIC-World FX rates in 2018: tmsnrt.rs/2egbfVh (Recasts; adds analyst quotes; adds May vote news; updates prices)

By Kate Duguid

NEW YORK, Jan 16 (Reuters) - The dollar rose against the euro on Wednesday as worries about the euro zone economy dented the single currency, while sterling was steady after British Prime Minister Theresa May's government won a no-confidence vote in parliament.

The euro was down 0.22 percent against the dollar, last at $1.139, after being compressed in morning trade to a 12-day trough of $1.138.

Data this week showed Germany barely escaped a recession in the second half of 2018 and European Central Bank chief Mario Draghi warned on Tuesday the euro zone economy was weaker than anticipated.

"The dimmer outlook was acknowledged by outgoing ECB President Mario Draghi, a cautious tone that gave added traction to the euro's slide from three-month highs," said Joe Manimbo, senior market analyst at Western Union. "Add it all up and it seems increasingly less likely that the ECB would be able to normalize monetary policy later this year."

The dollar rose even though Federal Reserve Chair Jerome Powell has signaled his willingness to pause the bank's monetary tightening plan. With inflation showing no sign of rising above the 2 percent target, and mounting worries about trade policy and slowing global growth, Powell has said the central bank will take a "patient" approach to rate hikes this year.

The pound held onto the day's gains on Wednesday, trading just off two-month highs against the euro.

May survived the no-confidence motion after securing the backing of her own party's rebels and Northern Irish allies. But she must now try to find a consensus with other lawmakers over how to proceed with Brexit after the deal she presented was voted down on Tuesday. She proposed immediate talks with other party leaders.

"She survived on a party-line vote, so we're not seeing much reaction in sterling to the outcome. Where we go from here is obviously an open question," said Daniel Katzive, head of foreign exchange strategy for North America at BNP Paribas.

In late afternoon trade, sterling was trading at 88.47 pence per euro, stronger than the 88.65 just before the vote and up 0.29 percent on the day. It held just off the two-month high of 88.40 pence.

Against the dollar, it was a shade firmer at $1.287, compared to around $1.286 before the vote. It hit a two-month high on Monday at $1.293.

Reporting by Kate Duguid and Abhinav Ramnarayan; Editing by Susan Thomas

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