CHF: Fading spot, rising FX reserves raise questions on SNB stance

• USD/CHF clearing to a new YTD on the back of the post-IJC dollar strength on Thursday – pair has printed higher highs for a sixth consecutive session, with the upside accelerating on the break of 0.8728, the mid-Jan high. Similarly, EUR/CHF has found  a base having topped the 50-dma at 0.9400 – a move that opens 0.9453, the 23.6% retracement for the downleg off the 2023 high.
• Some attention paid to the pick-up in Swiss FX reserves data earlier this week, and while FX revaluation and equity volatility since the December release may be flattering the headline – markets are wary of the currency after Jordan’s intervention in Davos (“strong CHF hurting Swiss companies”) and the more balanced currency language at the December decision (removing the phrase "the focus is on selling foreign currency.")
• A shift to domestic currency selling would show via growing FX reserves, and will raise focus on the monthly release as well as sight deposits data released every Monday.
• The Z4-Z5 SARON spread has widened to just over -10bps alongside the USD/CHF rally, consistent with a theme of a sharper easing cycle once the  first SNB cut is underway (SARON futures partially price a 25bps for the June meeting, and close to another 25bps in September).

Figure 1: CHF OIS pricing greater odds of faster easing