The euro dropped against its major counterparts in European deals on Tuesday, as German business confidence deteriorated more-than-expected in April and ECB Governing Council member Francois Villeroy de Galhau cautioned that rising protectionism would harm global growth.

Survey results from the Ifo Institute showed that the business sentiment index fell to 102.1 from 103.3 a month ago. The score was forecast to drop moderately to 102.8.

The indicator for the current business situation fell and expectations also deteriorated.

Speaking at the City Week banking conference in London, ECB policy maker Villeroy de Galhau warned that escalation of protectionist threats from the United States would dampen growth across the globe.

"The recent uncertainty is probably already having some negative effects on investment: you saw it in the British economy since the Brexit vote in 2016. And real tariffs would hurt more."

Traders remained focused on trade tensions between the U.S. and China ahead of a potential meeting in Beijing between officials from the world's largest and second-largest economies.

The European Central Bank reviews its monetary policy on Thursday and it is likely that the central bank will temper expectations for a quick exit from its massive stimulus program.

The currency showed mixed trading against its major rivals in the Asian session. While it held steady against the pound and the franc, it rose against the yen. Against the greenback, it dropped.

The euro declined to a 4-day low of 0.8743 against the pound, from a high of 0.8766 hit at 3:00 am ET. The next possible support for the euro is seen around the 0.86 area.

Data from the Office for National Statistics showed that the UK budget deficit decreased to its lowest March level since 2004.

Public sector net borrowing, excluding public sector banks, decreased by GBP 0.8 billion to GBP 1.3 billion in March. This was the lowest March net borrowing since 2004.

The single currency weakened to 1.2182 against the greenback, its weakest since March 1. If the euro falls further, it may find support around the 1.19 area.

The euro reversed from an early 4-day high of 132.96 against the yen and eased back to 132.63. The euro is likely to find support around the 130.00 level.

Figures from the Cabinet Office showed that Japan's leading index improved more than initially estimated in February.

The leading index, which measures the future economic activity rose to 106.0 in February from 105.9 in January, which was revised up from 105.6. The flash estimate for February was 105.8.

The 19-nation currency dropped to a weekly low of 1.1925 against the Swiss franc, compared to 1.1942 hit late New York Monday. On the downside, 1.18 is possibly seen as the next support for the euro.

Data from the Federal Customs Administration showed that Switzerland's trade surplus decreased in the first quarter.

The trade surplus declined to CHF 6.5 billion from CHF 8.3 billion in the fourth quarter of 2017. In the same period of last year, the surplus totaled CHF 9.9 billion.

The euro retreated to 1.5639 against the loonie, 1.6021 against the aussie and 1.7128 against the kiwi, from its early high of 1.5687, new 3-week high of 1.6081 and more than a 4-month high of 1.7180, respectively. The euro is seen finding support around 1.55 against the loonie, 1.58 against the aussie and 1.68 against the kiwi.

Looking ahead, U.S. S&P/Case-Shiller home price index for February, new home sales for March and consumer confidence for April are scheduled for release in the New York session.

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