Unless you’ve been living under a rock, you’ve probably heard that last Monday, SNB Chairman Philipp Hildebrand had formally stepped down from his post.
If you remember, news leaked out that Hildebrand’s wifey, Mrs. Kashya Hildebrand, a former hedge fund trader, allegedly sold around 400,000 CHF (or $418,000) a few weeks before her husband oversaw the SNB’s move to peg EUR/CHF at 1.2000.
The scandal not only raised questions about “insider trading” in the forex industry, but it also invited questions over the SNB‘s transparency. Calls for Hildebrand’s resignation followed the release of the scandal, and late on Monday, the head central banker finally agreed to resign.
Both EUR/CHF and USD/CHF dropped sharply at the release of Hildebrand’s resignation, with EUR/CHF reaching a low of 1.2108 before shooting back up to cap the day near its open price. The pair is currently bobbing around the same area, still 100 pips above the SNB’s declared threshold of 1.2000.
For the meantime, SNB second-in-command Thomas Jordan will be stepping in as the interim Chairman. It has yet to be decided whether or not Jordan will be taking the position on a more permanent basis.
Wait a minute. Who the heck is Jordan?
No, he isn’t related to basketball legend Michael Jordan (although I wouldn’t be surprised if his nickname is “Money” as well), but he is quite the central bank superstar.
Jordan first joined the SNB as an advisor in 1997 before formally joining the governing board in 2004. In late 2010, he was named SNB vice president and over the past two years has supervised the passage of stricter banking regulations at the central bank.
Jordan is also notorious for being rather hawkish, so it’ll be interesting to see how he will play into future monetary policy decisions. Remember, the SNB setting a peg against the euro is effectively weakening the franc, and this may just cause inflationary problems later down the road.
Still, I’ve got a feeling that Jordan will follow his predecessor’s footsteps and continue to maintain the peg. In fact, with the SNB’s credibility now in question following the trading scandal, I think the SNB will be even more forceful with its actions, just to send a message to the markets that it really means business and will follow through with its policy.
For now, I don’t see EUR/CHF going down much further, even with the euro’s prospects looking bleaker by the day. Just be careful trading this pair, as you never know when some news may cause it to spike in either direction!