Euro area inflation outlook remains benign

The IMF is unwilling to support a new bailout program unless Greece's debt was deemed to be sustainable in the medium term and it had a fully financed budget for the next 12 months.

Although near-term risks of an exit have subsided, with the expected re-opening of the Greek stock market on Monday being another small step in the right direction, the medium-term risks remain high, particularly given the grim economic picture.

"Elsewhere, despite an uptick in euro area inflation last week, the increase may once again have been driven by technical factors, which are likely to be temporary. As a result, the euro area inflation outlook remains benign supporting accommodative ECB policy at least until September 2016 and perhaps even beyond then", says Barclays.

Further EUR depreciation is expected on the basis of poor returns to capital and significant excess slack in the economy.

"The final reading of European PMIs are expected to remain broadly unchanged. Elsewhere, Italian IP is expected to have contracted by 0.5% m/m in June, after rising sharply in May (+0.9%), and French IP is expected to decline 0.3% m/m in June, driven by the manufacturing and energy subcomponents", added Barclays. 

The early soft indicators for Q3 point to some rebalancing between private consumption and investment rather than an outright acceleration.