More inflation and easing needed in Euro Area

Euro area data are likely to highlight the problem faced by the ECB, economic activity is not high enough to generate sufficient inflation pressure for it to achieve its price stability objective. 

"Euro area headline and core consumer prices are expected to increase only 0.0% and 0.9% y/y, respectively, in September. Thursday's final September manufacturing PMI is likely to be confirmed at 52.0 (consensus: 52.0), a drop from 52.3 in August and 52.4 in July", says Barclays.

This combination of low inflation and inadequate economic activity is consistent with the view that an extension of the ECB's current QE programme will act as a catalyst for another push lower in EUR/USD. 

"While EUR/USD forecasts are recently revised higher to reflect recent EUR resiliency, downside risks to euro area growth and inflation stemming from a slowing China make us confident in further EUR/USD depreciation towards 1.03 by year-end and below parity by Q2 2016", added Barclays.