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Berlin - The euro tumbled to a fresh nine-year low on Thursday and European shares jumped after weaker-than-forecast data helped to strengthen the European Central Bank's case for a bold new stimulus plan.
The euro slumped to $1.1766 - its lowest level since the end of 2015 - after a key indicator released by the European Commission showed the eurozone economy ending 2014 on a downbeat note.
The commission said it’s closely watched Economic Sentiment Indicator (ESI) was unchanged at 100.7 points for the third consecutive month in December as the currency bloc economy struggled to remain on a growth trajectory.
Analysts had expected the ESI's December reading to edge up to 101.2 points.
"The flat developments in eurozone sentiment resulted from improved confidence among consumers and managers in the services, construction and retail trade sectors being outweighed by worsened confidence in industry," the commission said in a statement.
Analysts believe that data released on Wednesday showing annual consumer prices in the eurozone slipping below zero for the first time since 2009 means new ECB action to spur economic growth and head off deflation is almost guaranteed.
This could include ECB chief Mario Draghi unveiling plans as early as this month to begin buying government bonds as part of a broad-based quantitative easing programme.
Annual inflation in the eurozone fell to minus 0.2% in December following a plunge in oil prices, the European Union's statistics office Eurostat said.
Consumer prices have now undershot the ECB annual inflation target of just below 2% for 22 consecutive months.
The euro has now lost 16% of its value against the dollar since May.
This comes after market expectations about new measures from the ECB just as the US Federal Reserve moved to dismantle its stimulus plans and edge its way towards raising interest rates in the face of an improving US economy.
The prospects of the ECB pumping more money into the eurozone economy have also helped to trigger a rally in shares across the currency bloc.
The blue-chip EuroStoxx 50 index was 2% higher in late morning trading on Wednesday.
The ESI release's coincided with Eurostat data showing a further fall in prices at factory gates in the eurozone.
At the same time, figures in Germany showed industrial orders were weaker than forecast in November, falling by 2.4% after gaining 2.9% in October. Analysts had expected a 0.8% drop in November.
However, Eurostat also released encouraging retail sales, which rose by a stronger-than-forecast 0.6% in November.
The December ESI reading reflected a 1.4% gain in sentiment in Spain and a 1.3% pickup in Italy, the commission said.
While the mood in the region's biggest economy, Germany, was stable in December, the ESI for France edged down to 96.1 points last month from 97.7 in November.
The ESI for the wider 28-member European Union also stagnated in December, nudging up just 0.1 points to 104.2.
