USD/CHF holds position above 0.8500 due to waning likelihood of a Fed bumper rate cut

• USD/CHF gains ground as recent labor data decreased the chances of an aggressive rate cut by the Fed in November.
• CME FedWatch Tool suggests 31.4% odds of a 50 basis point Fed rate cut, down from 49.3% a week ago.
• Swiss CPI slowed to 0.8% YoY in September, down from both expected and August's reading of 1.1%.

USD/CHF continues its winning streak for the fourth successive session, trading around 0.8510 during the European hours on Thursday. This upside of the USD/CHF pair could be attributed to recent strong US labor data, which decreased the likelihood of the Federal Reserve (Fed) delivering another aggressive rate cut in November.

The ADP US Employment Change reported an increase of 143,000 jobs in September, exceeding the anticipated 120,000 jobs. Furthermore, annual pay increased by 4.7% year-over-year. The total number of jobs added in August was revised upward from 99,000 to 103,000. This report indicates that the labor market is in better condition than previously perceived at the start of the third quarter.

The CME FedWatch Tool indicates that markets are assigning a 65.9% probability to a 25 basis point rate cut by the Federal Reserve in November, while the likelihood of a 50 basis point cut is 31.4%, down from 49.3% a week ago.

The Swiss Franc (CHF) might have received downward pressure following weaker-than-expected inflation data released on Thursday. Switzerland's Consumer Price Index slowed to 0.8% year-over-year in September, down from both market expectations and August's figure of 1.1%. This is the lowest inflation rate since September 2021. Additionally, the monthly inflation rate dropped by 0.3%, exceeding forecasts of a 0.1% decline, after remaining flat in August.

The downside of the Swiss Franc (CHF) could be restrained due to safe-haven flows amid escalating Middle-East tensions. The Israeli Broadcasting Authority (IBA) reported that Israel's security cabinet has resolved to take decisive action in response to the recent Iranian attack. On Tuesday night, Iran launched more than 200 ballistic missiles and drone strikes targeting Israel.