Woolnough: Japan on war footing as Fed prepares for QE2

CURRENCY VIGILANTES

As the US Federal Reserve prepares for a second wave of QE, M&G's Richard Woolnough considers the impact of these 'unconventional' measures on the market.

We have often spoken about QE, and how it could result in the demise of the bond vigilante and the birth of the currency vigilante. Well, we are getting very close to the presumed launch of further unconventional monetary policy by the Fed on 3 November. The market is trying to work out if it is shock and awe or a gradual siege mentality that the Fed will deploy. Quite interestingly, the Fed has been asking US bond dealers what they are expecting, and what the markets' reaction to QE2 would be. However, this is not a purely domestic issue. The currency vigilantes are likely to react b...