The euro strengthened Monday, while European stocks retreated from early highs, despite data showing inflation in the euro zone sank to its lowest level since 2009. The anemic pace of price increases steps up the pressure on the European Central Bank to introduce fresh measures to stave off low inflation, but analysts and investors say the ECB will need to back up its recent dovish rhetoric with action before the euro will weaken significantly. The European Union's statistics agency Monday said consumer prices rose 0.5% from March 2013, the lowest annual rate of inflation since November 2009 and well below the European Central Bank's target of just under 2%. The euro dipped immediately after the data, but quickly recovered. Midmorning it was 0.3% higher against the dollar at $1.3791. It remains not far below the 2½-year high of almost $1.40 hit early this month. The common currency gained 0.7% against the yen and 0.3% against sterling. "The market is testing the ECB's resolve. Investors are waiting to see concrete action and we will not see the euro weaken in a sustainable fashion until we get that," said Phyllis Papadavid, a senior foreign-exchange strategist at BNP Paribas. BNP.FR -0.20% Last week a raft of ECB officials publicly talked up the possibility of new easing measures, including negative interest rates on overnight deposits or even full-scale asset purchases. While low inflation is likely to force the central bank's hand in the coming months, the coming policy meeting on Thursday may be too soon for fresh steps, Ms. Papadavid said. European stocks—another beneficiary of ECB easing talk—dipped slightly having touched a three-week high in early trade. The Stoxx Europe 600 index was 0.2% higher, while Germany's DAX and France's CAC-40 were marginally lower. Outside the euro zone, the U.K.'s FTSE 100 was up 0.2%. U.S. stock futures pointed higher, indicating a 0.3% opening gain for the S&P 500. Changes in futures don't necessarily predict market moves after the opening bell. Elsewhere, Turkish assets received a boost Monday after the country's prime minister appeared to have scored a decisive victory in local elections. Exit polls showed Prime Minister Recep Tayyip Erdogan's ruling Justice and Development Party, or AKP, winning a comfortable plurality of votes nationally, but the margin of victory and his party's control of major cities was still unclear early Monday. Turkey's BIST-100 index opened up almost 2% higher, while the Turkish lira added 1.9% against the dollar to hit 2.1478—its strongest level since Jan. 2. In corporate news, shares in U.K. insurers and pension managers rose Monday, recovering some of the losses suffered Friday after the Financial Conduct Authority confirmed it would launch an inquiry into charges and restrictions on old policies worth billions of pounds. Shares in Aviva AV.LN +1.83% PLC, Legal & General LGEN.LN +0.88% PLC and Prudential PRU.LN +0.08% PLC all climbed. In commodities, Brent crude was down 0.1% at $108 a barrel, while spot gold was down 0.1% at $1,292.50 a troy ounce.

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