"An undershoot would significantly increase the risk that the ECB lowers the deposit rate on Thursday," said Paul Robson, a strategist with RBS in London. "We would look to sell the euro if CPI prints 0.5 percent."
The yen struggled to gain traction versus the dollar and touched a fresh six-year low against the New Zealand dollar as demand for the safe-haven currency waned amid hopes of more stimulus from China. The dollar inched up 0.1 percent to 103 yen, well above Friday's session low near 102.03 yen.
The kiwi, supported for months by expectations of a cycle of interest rate rises begun by the central bank at its last meeting, rose as far as 89.26 yen, a level not seen since November 2007.
Read MoreFed's Plosser: Market reaction to the Fed statement was surprising
Traders said China's official manufacturing PMI survey due on Tuesday will be closely watched after a recent string of disappointing data pointed to a slowdown in the world's second biggest economy.
"We expect a decline to 49.8 in March from 50.2 in February, falling below 50 for the first time in 17 months, as growth momentum continues to fade. This should further heighten the urgency to ease policy," analysts at Nomura wrote in a note to clients.
Investors will also be watching comments by U.S. Federal Reserve Chair Janet Yellen due later on Monday for any fresh hints on the U.S. monetary policy outlook.
The dollar got a boost earlier this month after Yellen said the Fed could raise rates six months after its bond-buying stimulus ends, remarks that were seen as suggesting a rate hike could come as early as spring 2015.