Daily Market Commentary for January 9, 2012

The Federal Reserve reported that during November, U.S. consumers increased their debt by a seasonally adjusted $20.4 billion striking the largest consumer debt increase since November 2001. (read more at Millennium-Traders.Com)
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German Chancellor Angela Merkel and French President Nicolas Sarkozy reported progress on plans to enact a pact to toughen budget rules across the euro zone. Merkel and Sarkozy met in Berlin today in an effort to iron out differences ahead of the summit of European leaders on January 30. Merkel warned that a second aid package for Greece cannot be paid out unless officials make rapid progress on a rescue plan which would include writedowns for private bondholders. Merkel said that, failure to finalize a rescue package would make it impossible to release Greece’s next round of aid in coming months. Merkel emphasized that haircuts for Greek bondholders remain an 'exceptional' case that will not be repeated elsewhere in the euro zone. Merkel said it is the intention of leaders' that no country leave the euro. Sarkozy acknowledged that the situation in Europe remains 'very tense' and called for negotiations on the fiscal pact to be wrapped up in several days. Merkel said that any fiscal pact needs to ensure economic growth across the region and that leaders would study labor market reforms.

An abrupt action by Swiss central bank chief Philipp Hildebrand added stir for the Swiss franc. Hildebrand quit today - just days after denying wrongdoing and saying he planned to stay on amid an escalating controversy over his wife’s currency trades. On August 15, Hildebrand’s wife Kashya, bought $504,000, as the dollar traded near an all-time low versus the franc. A few weeks later, the Swiss franc fell sharply against all major rivals as the SNB surprised markets by announcing the euro-Swiss franc floor. Just last week the SNB said that Philipp Hildebrand had bought $1.17 million last March, using funds from the sale of a family property then in October, he sold $516,000 to buy another property. Both transactions were permitted by the central bank since they were tied to a personal real-estate. Over the weekend, Hildebrand received support from several of the countries’ largest parties such as, Swiss President Eveline Widmer-Schlumpf, who is the country’s finance minister who told Swiss television on Friday that there was 'absolutely no reason' for the Swiss government to distrust Hildebrand. The SNB Governing Board said Switzerland 'is losing an outstanding central banker with excellent international connections, which have brought great benefit to our country'. Traders questioned whether the Swiss National Bank [SNB] will be as committed to preserving the cap that the central bank placed on the value of the currency last year, on the heals of Hildebrand's resignation which provided modest support for the Swiss franc. In September, the SNB decreed that the euro wouldn’t be allowed to trade below 1.20 Swiss francs however, in a statement by the SNB Governing Board said the measure would remain in place and unchanged. “This policy will be pursued further with the utmost determination,” the SNB said. The SNB announced that the three-member Governing Board’s vice chairman, Thomas Jordan will serve as chairman for the time being and the position on the board will be filled as quickly as possible.


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