Bloomberg is reporting that so-called “QE2″ may be contagious this week, as Central Banks engage in a race to the bottom for their respective currencies:
fallout from the Fed could cause Bank of Japan Governor Masaaki Shirakawa to do more for his economy and Bank of England Governor Mervyn King to leave the door open to more aid. Even as European Central Bank President Jean-Claude Trichet holds the line against inflation, he may eventually change course if the euro surges, while emerging markets are already acting to restrain currencies.
This bodes well for nominal asset prices in the short term: stocks, commodities, metals… But the long term inflation repercussions could wipe out real gains in the process. Pricing in these rounds of “Quantitative Easing” is not for retail investors.