ECB’s actions likely will reinstitute EUR weakness trend

Adjustment of China's FX regime and increased concerns about Chinese growth, have materially increased downside risks for euro area growth and inflation, but they also appear to have pushed back expectations for Fed tightening. 

"EUR/USD is forecasted higher than earlier to reflect considerable changes to the global outlook and the common currency's recent resiliency versus the USD, but significant further downside in EUR/USD is still expected", says Barclays. 

These developments, in conjunction with the EUR's resiliency, have led to a tightening in euro area financial conditions that are expected to push the ECB to respond with further easing. 

"The ECB's actions likely will reinstitute trend EUR weakness, as it serves to remind markets of the euro area's more fragile recovery relative to other G10 economies, but the descent may be slower than previously expected", added Barclays.