* ECB holds monthly meeting
* Faltering dollar weighs on EU stocks
* Clariant falls on surprise stake sale (Adds shares, context)
LONDON, Jan 25 (Reuters) - European shares recouped early trading losses and were broadly flat on Thursday as investors waited to see how the European Central Bank would react to a fast-rising euro, which hit the continent's stocks during the previous session.
At 0920 GMT, the pan-European STOXX 600 index unchanged, while Germany's exporter-heavy DAX fell 0.1 percent and France's CAC 40 edged up 0.2 percent.
"We expect (ECB head) Draghi to continue to strike a dovish tone at Thursdays ECB meeting", said BNP Paribas analysts, adding that any decline in the common currency would be "moderate".
The dollar, at 1.24 against a euro, is at a three-year low after U.S. Treasury secretary Steven Mnuchin said he welcomed a weaker currency.
A strong euro typically hurts European exporters whose products become less competitive against rivals producing in a weaker currency.
"We would flag Airbus in particular as the stock that stands out", Citi analysts said, as the stock, which is up above 8 percent since the beginning of the year, is suffering its third session in a row in negative territory with a 0.6 percent decline.
Trading updates put a highlight on the currency impact with drinks company Diageo (up 1.4 percent) saying its sales growth was crimped by the strengthening pound.
Conversely, the currency move was good news for British clothing retailer Next, as RBC upgraded the stock.
Speciality baker Aryzta AG posted the STOXX 600 worst performance with a 22 percent fall after it sharply cut its 2018 core profit forecast.
In the tech sector, Software AG fell 5.5 percent. It reported a decline in third-quarter core profits as its digital, database and consulting divisions all showed lacklustre growth.
STMicroelectronics edged down 1 percent after the chipmaker said auto and industrial demand would offset a seasonal smartphone dip in the first quarter of this year.
In a smaller capitalisations, Swedish biometric group Fingerprint Cards lost over 20 percent of its value after it warned on profits and said it would slash jobs.
Nordic bank Nordea gave a disappointing update with fourth quarter operating profit below market expectations and fell 2.5 percent.
Clariant sustained the second worst fall of the STOXX 600, down 6.4 percent as activist investor White Tale sold out of the speciality chemicals group after failing to win an independent strategic review and board seats.
British lender Close Brothers Group gave a different picture -- seeing a rise in first-half profit, driven by strength in banking and asset management and higher trading income from market maker Winterflood. The shares were up 4.1 percent. (Editing by Tom Pfeiffer)