U.S. stock index futures slipped on Tuesday, a day after stocks hit a 14-month high, as concerns about the health of the German economy and euro zone banks drove the U.S. dollar higher.

A slew of U.S. economic data before the market opens could determine the direction of trading, even as the Federal Reserve starts a two-day policy-setting meeting.

The U.S. dollar strengthened against the euro in part after a German think tank said economic sentiment fell in December, pointing to a slowdown in the pace of recovery in Europe's largest economy.

The dollar index <.DXY>, measured against a basket of currencies, rose 0.8 percent to its highest level since early October.

What's moving futures right now is the strength in the dollar, as that generally correlates with negative action in the S&P 500 futures, said Tom Schrader, managing director of U.S. equity trading at Stifel Nicolaus Capital Markets in Baltimore.

We have a significant amount of economic news today. Most of it will come out before the open, and if we see weakness, it will put pressure (on stocks), Schrader said.

S&P 500 futures fell 3.3 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures dropped 20 points and Nasdaq 100 futures lost 5.5 points.

The New York Federal Reserve releases its Empire State manufacturing survey for December at 8:30 a.m. EST (1330 GMT). Economists expect a reading of 24.00 compared with 23.51 in November.

Also at 8:30 a.m. (1330 GMT), the Labor Department releases the November producer price index. Economists in a Reuters survey forecast a 0.8 percent increase, compared with a 0.3 percent rise in October. Excluding volatile food and energy items, PPI is seen up 0.2 percent, compared with a 0.6 percent drop in the prior month.

Redbook releases at 8:55 a.m. (1355 GMT) its retail sales index of department and chain store sales for December versus November.

The Federal Reserve releases industrial production and capacity utilization data for November at 9:15 a.m. (1415 GMT). Economists forecast an 0.5 percent increase in production compared with a 0.1 percent rise in October.

In company news, Boeing Co is set to make the first test flight of its 787 Dreamliner after a delay of almost two-and-a-half years. The new fuel-efficient plane is seen as key to the company's future.

Kraft Foods Inc said it will maintain discipline in its pursuit of British chocolate maker Cadbury Plc , suggesting the U.S. group will resist calls to raise its offer.

Starlims Technologies Ltd's U.S.-traded shares surged 45 percent to $13.77 in premarket trading after the Israel-based company agreed to be acquired by Abbott Laboratories for about $123 million.

U.S. stocks closed at 14-month highs on Monday as Abu Dhabi's $10 billion in aid to help Dubai eased concerns over the emirate's debt problems and Exxon Mobil Corp's proposed $30 billion takeover of XTO Energy Inc raised optimism about merger-and-acquisition activity.

(Editing by Jeffrey Benkoe)