The euro hit a near nine-year low today as markets bet the prospect of inflation across the region turning negative and political uncertainty in Greece will force the European Central Bank to launch quantitative easing.
Global shares were also under pressure amid yet another hefty slide in oil prices.
The euro fell as low $1.18605 overnight, its weakest level since March 2006, and was struggling at $1.1895 this afternoon.
Investors who are betting that the ECB will open up a bond-buying programme as the US, UK and Japanese central banks have done were emboldened by an interview with ECB president Mario Draghi in Germany's Handelsblatt on Friday.
Mr Draghi said the risk of the central bank not fulfilling its mandate of preserving price stability was higher now than half a year ago.
German regional inflation figures saw more weakness in December, adding to the downward pressure on the euro and government bond yields before Wednesday's euro zone estimate.
Economists forecast that euro zone consumer prices fell 0.1% in December, the first decline since 2009. That should fan expectations the ECB will ease at its first policy meeting of the year on January 22.
Greek politics were also at the forefront of market thinking as the debate around the possibility of elections later this month resulting in the country leaving the euro zone picked up again.
The dollar rose broadly, extending its recent bull run to a nine-year high as markets wagered a relatively healthy US economy will lead the Federal Reserve to raise rates in the middle of this year.
Although it will start slowly, there is a heavy calendar of US data this week including PMIs, retail figures and car sales - all expected to show a strengthening of the economy.
Europe, in contrast, remains in a far more fragile state as it battles the prospect of euro zone deflation and the threat of Britain leaving the European Union.
Meanwhile, oil prices, whose decline of more than 50% from peaks hit in June rattled many energy producers, hit a fresh five and a half year low as global growth concerns fanned fears of a supply glut.
