Peter Grant notes that the currency markets were taken by surprise and anticipates global debt monetization and currency depreciation (expected but not so soon and so fast):

“The Fed did indeed announce that it would seek to buy up to an additional $750 bln in MBS, bringing the total projected purchases of such assets up to $1.25 trl. They also announced that they would buy up to an additional $100 bln in agency debt, bringing that total up to $200 bln. On top of all that, the FOMC decided that late next week the Fed would begin purchasing up to $300 bln in longer-term Treasuries, with emphasis on the 2 to 10-year segment of the yield curve. Purchases will be conducted by primary dealers two to three times per week through competitive auctions….”

Karl Denninger warns that the bond market will sell into the purchase:

“The BOE executed their first “QE” operation today.The “bid to cover” was an astonishing 7.35 This means that for every bond purchased 7.35 were tendered, or made available by willing sellers……the BOE now has seen exactly what happens when you promise as a government to overpay for something – everyone hits your bid immediately!”

Meanwhile, Boris Schlossberg notes that the bond market here has so far accepted the stunning move with yields on the 10 year bond falling by 50 basis points in 24 hours, while the dollar  collapsed across the board. He explains Bernanke’s decision as reflecting the fact that foreign capital flows are going to be hard to sustain (i.e. the Chinese aren’t going to be buying treasuries for much longer).