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USD/CHF extended the gains from the previous trading day and was trading around 0.8650 during early European trading on Tuesday. The pair’s downside may be limited as the U.S. dollar (USD) finds support after a surge in U.S. Treasury yields, which climbed more than 2% on Monday. At press time, the 2-year and 10-year U.S. Treasury yields were 4.04% and 4.20% respectively.
Recent economic data has dispelled expectations that the Federal Reserve will cut interest rates significantly in November. According to the Chicago Mercantile Exchange’s Fed Watch Tool, the probability that the Fed will cut interest rates by 25 basis points in November is 89.1%, and the rate cut is not expected to be larger, with a rate cut of 50 basis points.
On Monday, Minneapolis Federal Reserve President Neel Kashkari emphasized that the Fed is closely monitoring the U.S. labor market for signs of rapid destabilization. Kashkari reminded investors that the pace of rate cuts over the next few quarters is expected to be gradual, suggesting that any monetary easing is likely to be mild rather than aggressive.
The Swiss franc (CHF) is under pressure as Swiss inflation continues to slow, bolstering expectations that the Swiss National Bank (SNB) will cut interest rates again at its upcoming December meeting. In September, the Swiss National Bank cut its key interest rate by 0.25% for the third consecutive time, taking it to 1%. Inflation also fell for a third consecutive month, falling to 0.8% in September from 1.1% in August – the lowest level in more than three years.
However, the Swiss franc may find support from safe-haven demand amid uncertainty over the US election and rising geopolitical tensions in the Middle East. Israeli attacks on Hezbollah-linked financial venues in Beirut have heightened fears of an escalation in the conflict.
In the U.S. presidential race, Democratic candidate Kamala Harris and Republican Donald Trump are sending starkly different messages as they try to sway the final two weeks before Election Day. Deciding voters.
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