Euro area data this week to highlight the problem faced by the ECB

Euro area data this week are likely to highlight the problem faced by the ECB. The economic activity is not high enough to generate sufficient inflation pressure for it to achieve its price stability objective. Consensus expect euro area headline and core consumer prices (Wednesday) 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.

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 EURUSD. 

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