“It’s increasingly likely that the Fed and European Central Bank will ease further by September,” said Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official. In Japan, the government may implement a supplementary budget by September, with the central bank expanding asset purchases, Adachi said.
The euro declined 1 percent versus the yen, falling for the first time in four days.
The Swedish krona rose all 16 of its most-traded peers, appreciating 1.5 percent against the euro and 0.8 percent versus the dollar after Statistics Sweden data showed gross domestic product unexpectedly accelerated in the second quarter. GDP grew 1.4 percent, beating a median forecast for a gain of 0.2 percent in a survey of economists by Bloomberg.
Draghi’s proposal involves Europe’s rescue fund buying government bonds on the primary market, buttressed by ECB purchases on the secondary market to ensure transmission of its record-low interest rates, two central bank officials said July 27 on condition of anonymity. Further ECB rate cuts and long-term loans to banks are also up for discussion, one of the officials said.
The cost of insuring European corporate and sovereign bonds using credit-default swaps declined for a fourth day. The Markit iTraxx Crossover Index of swaps on 50 mostly junk-rated European companies fell 13 basis points to 627, the lowest since April 3. The Markit iTraxx SovX Western Europe Index tied to the debt of 15 governments dropped six basis points to 259. Draghi must now deliver or face a renewed selloff on bond markets, where soaring Spanish and Italian yields have fueled speculation that the monetary union could fall apart. The ECB chief is also attempting to win over Bundesbank President Jens Weidmann, a critic of ECB bond purchases.
Figures tomorrow may show euro-area unemployment climbed to a record 11.2 percent last month, a Bloomberg survey showed.