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FX: SNB Hildebrand Resigns, Merkel-Sarkozy Meeting Disappoints

Last updated 1/9/2012 9:24 AM ET (GMT -5) 1 Comments

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Kathy Lien

Director of Currency Research, GFT

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.

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Comments (1)

traderwillie

January 09, 2012 at 09:48 PM ET

Undoubtedly, the European situation is beyond control, and continues to keep pressure on the euro. But no currency can move straight in one direction. right? Historic short positions in the euro are a precursor for a bounce to come, whether Thursday or not.
Bill Jenkins
www.thefxtradingmasters.com
www.empowernetwork.com/traderwillie

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.