The USD/CHF currency pair is giving back gains from the previous session, trading around 0.8650 in early European hours on Tuesday. However, this decline may be limited as the U.S. Dollar strengthens following a rise in U.S. Treasury yields, which surpassed 2% on Monday. Currently, the 2-year and 10-year U.S. Treasury bond yields are at 4.04% and 4.20%, respectively.
Recent economic data have reduced the chances of a significant rate cut by the Federal Reserve (Fed) in November. According to the CME FedWatch Tool, there is an 89.1% likelihood of a 25-basis-point cut, with no expectations for a more substantial 50-basis-point reduction.
On Monday, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, noted that the Fed is vigilantly watching the U.S. labor market for signs of instability. He advised investors to prepare for a gradual pace of rate cuts in the upcoming quarters, indicating a preference for moderate monetary easing.
The Swiss Franc (CHF) is under pressure due to a slowdown in Swiss inflation, bolstering expectations for another rate cut by the Swiss National Bank (SNB) in December. In September, the SNB cut its key rate for the third consecutive time to 1%, coinciding with inflation dipping to 0.8%, its lowest level in over three years.
Nonetheless, the CHF may receive support from safe-haven demand amid uncertainties surrounding the U.S. elections and escalating geopolitical tensions in the Middle East, particularly due to recent Israeli strikes on Hezbollah-linked financial sites in Beirut.
In the U.S. presidential race, Democratic candidate Kamala Harris and Republican Donald Trump are working to sway undecided voters with contrasting messages as Election Day approaches.
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