• USD/CHF gains ground as recent US data have tempered the odds of more bumper rate cuts by the Fed.
• Improved US Treasury yields contribute support to strengthen the Greenback.
• The downside of the Swiss Franc could be restrained due to safe-haven flows amid rising Middle-East tensions.

USD/CHF extends its gains for the second successive day, hovering around 0.8660 during the Asian trading hours on Thursday. The US Dollar (USD) gains ground as strong labor and inflation data has tempered expectations for aggressive easing by the Federal Reserve (Fed). According to the CME FedWatch Tool, there is currently a 92.1% probability of a 25-basis-point rate cut in November, with no expectation of a larger 50-basis-point reduction.

The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, continues its winning streak for the fifth consecutive session, bolstered by the improved US Treasury yields after two days of losses. The DXY trades around 103.60, maintaining its position near two-month highs with 2-year and 10-year yields on US Treasury bonds standing at 3.94% and 4.03%, respectively, at the time of writing.

The downside of the Swiss Franc (CHF) could be limited due to safe-haven flows amid rising tensions in the Middle East. On Wednesday, Israel intensified its airstrikes on Lebanon, including an attack that destroyed the municipal headquarters of a major town, resulting in the deaths of 16 individuals, including the mayor. This marks the largest assault on an official Lebanese state building since the onset of the Israeli air campaign, according to Reuters.

The Swiss inflation rate fell to 0.8% in September, marking a three-year low and raising the probability of another 25-basis-point rate cut by the Swiss National Bank (SNB) in December. In September, the SNB had already reduced its key policy rate by 25 basis points to 1%, representing the third consecutive cut and bringing borrowing costs to their lowest level since early 2023.