A surge in euro zone inflation in October beat all expectations, sending the euro up against the dollar and boosting prospects of a rise in European Central Bank interest rates despite weakening sentiment.
European Union statistics office Eurostat estimated consumer prices in the 13 countries using the euro rose 2.6 per cent year-on-year, up from 2.1 per cent in September and well above the ECB's target of just below 2 per cent.
The estimate, containing no detailed breakdown or month-on- month data, was higher than all 47 forecasts in a Reuters poll of economists, which gave a range of 2.2-2.5 per cent.
The jump was likely to have stemmed from food prices, whose sharp increases came on top of energy-related base effects.
"That of course will be more important for the hawks at the ECB than the modest slippage we are seeing in industrial and consumer confidence," said Holger Schmieding, co-head of European economics at Bank of America.
With the US Federal Reserve expected to cut rates on Wednesday and euro zone inflation raising chances of an ECB hike, the euro rose against the dollar to $1.4448 from $1.4426.
The European Commission's business and consumer confidence monthly survey showed, however, that consumer inflation expectations 12 months ahead eased to 26 points from 28 in September and producer selling price expectations were stable.