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FX: SNB Hildebrand Resigns, Merkel-Sarkozy Meeting Disappoints

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The Swiss are making news this morning with Central Bank President Hildebrand announcing his resignation. After concerns about a currency transaction made by his wife last year, Hildebrand has decided to step down, leaving a vacuum of leadership in the SNB's three-member board. As the key architect behind the EUR/CHF peg, his resignation pushed the Franc higher. The main concern was that the SNB would no longer consider a higher peg for EUR/CHF and may even back away from their current peg. However given how successful the peg has been, it is extremely unlikely that the Swiss National Bank will move away from the peg and for this reason the ultimate impact of Hildebrand's resignation on the Swiss Franc should be minimal.

Although the euro is trading higher against the U.S. dollar this morning, investors are not convinced that the leaders of Europe have what it takes to save the euro. All eyes were on the talks in Berlin today but unfortunately very little progress was made. German Chancellor Merkel said Germany and France were very close to an agreement and that an EU Fiscal Pact may be completed in January or March at the latest. The euro may have enjoyed a bit of a relief rally but Merkel and Sarkozy have done nothing but kick the can down the road and if we cross our fingers, hopefully more significant progress will be made later this month. The continued risks of a country leaving the Eurozone has kept the euro under water and no one believes the Germans and French when they say that no country will leave the Eurozone because unless they are willing to work more quickly and make some major commitments, it is out of their hands. With this in mind however, the EUR/USD has come under aggressively selling over the past few weeks and the large amount of short euro positions points to the possibility of a short squeeze if the ECB leaves rates on hold Thursday. We will also be keeping an eye on European bond auctions because they will continue to be an important measure of consumer confidence.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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