The euro area's final October annual inflation rate was 2.0 percent, unchanged from the flash estimate and up from September's 1.7 percent. Sectorally, services remained the primary driver, contributing 1.77 percentage points to the euro area's inflation. Meanwhile, energy prices acted as a counterbalance, subtracting 0.45 points.

Year-over-year, the unrevised narrow core rate was stable at the previous month's 2.7 percent, as was the wider measure that excludes just energy and unprocessed food. Elsewhere, the rate in non-energy industrial goods slightly rose to 0.5 percent, while energy (minus 4.6 percent after minus 6.1 percent) had a significant negative impact. By contrast, food, alcohol and tobacco had a positive effect (2.9 percent after 2.4 percent).

Regionally, headline inflation rose in France (1.6 percent after 1.4 percent), Germany (2.4 percent after 1.8 percent), Italy (1.0 percent after 0.7 percent) and Spain (1.8 percent after 1.7 percent). The Spanish, French, Italian and German rates were 0.1, 0.2, 0.3 and 0.6 percentage points higher than in September. Inflation in Italy, France and Spain is below the ECB's target, while Germany moved above.

Confirmation of the October data should leave the ECB on course to ease again next month but a 25 basis point cut still looks slightly more more likely than a 50 basis point move. Today's reports trim both the Eurozone RPI and RPI-P to 1, implying that overall economic activity is moving in line with market expectations.

No revision from the flash report is the call with October Eurozone HICP at 2.0 percent on year for the total and 2.7 percent for the narrow core.

The harmonised index of consumer prices (HICP) is a measure of consumer prices used to calculate inflation on a consistent basis across the European Union. Changes in the index provide an estimate of inflation, as targeted by the European Central Bank (ECB). Eurostat provides statistics for the EU and Eurozone aggregates, individual member states and for the major subsectors. Over the short-term, the central bank focusses on a number of core measures which seek to strip out the most volatile components and so give a much better guide to underlying developments. Amongst these, financial markets normally concentrate upon the narrowest gauge which excludes energy, food, alcohol and tobacco.

The measure of choice in the European Monetary Union (EMU) is the harmonized index of consumer prices which has been constructed to allow cross member state comparisons. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In the European Monetary Union, where monetary policy decisions rest on the ECB's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.

Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.

Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the HICP are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.