The poor performance of the Chinese economy is likely to increase downside risks for euro area growth and inflation. Therefore, ECB is likely to respond the down momentum with additional policy easing in the form of a time extension to QE.
Barclays anticipates deposit rate cut of 10 bp. However, a deposit rate cut is likely to build pressure on the EUR. Therefore, EURUSD pair is likely to fall further.
"We forecast EURUSD to depreciate to 1.03 by year-end and trade at 0.95 by Q3 16", argues Barclays.
