Swiss National Bank foreign exchange reserves data for May rose to CHF 602.1bn from 587.9bn. Around CHF 9bn of the increase can be explained by valuation effects (the CHF depreciated approximately 1.5% versus its foreign currency weighted basket in May).
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Therefore, the data suggests the SNB remained very active in FX markets in May to the tune of around CHF 5bn. EURCHF’s stability despite sizeable SNB intervention indicate that inflows from elsewhere in the CHF are quite strong at the moment. Two potential sources are: (1) Switzerland’s external position is CHF supportive (broad basic balance of payments was in CHF 19.4bn surplus in 2015) and (2) the large inbound M&A deal announced at the start of February.
In our view the fact that the SNB continue to illustrate a strong resolve in preventing a stronger CHF is supportive of EURCHF gradually grinding higher and we continue to target 1.16 in that cross by year-end.