USD/CHF clings to gains above 0.8650 as Fed seems to cut interest rates gradually

• USD/CHF grips gains near 0.8670 as traders priced out Fed large rate cut bets.
• A slew of upbeat US data has pointed to US economic resilience.
• The SNB is expected to extend its policy-easing cycle further.

The USD/CHF pair holds onto gains near an eight-week high of 0.8670 in Friday's London session. The Swiss Franc pair remains firm as traders have priced out expectations for the Federal Reserve (Fed) to cut interest rates by a larger-than-usual size of 50 basis points (bps) again in the November meeting.

Traders expect the Fed to go slow on rate cuts as a slew of United States (US) economic data has pointed to economic resilience. After surprisingly upbeat Nonfarm Payrolls (NFP) and the ISM Services PMI for September, monthly Retail Sales data for the same period has come in better than expected. Thursday's Retail Sales data rose at a faster-than-expected pace of 0.4%.

According to the CME FedWatch tool, there is a strong probability for the Fed to reduce interest rates by 50 bps in the remaining year. Also, the Fed is expected to cut its borrowing rates by 25 bps in each of the two meetings in November and December, which remained this year.

On the political front, market speculation for the US presidential elections that are scheduled on November 5 will influence the US Dollar. According to FiveThirtyEight's daily election poll tracker, Democratic Kamala Harris is leading polls and has a 2.4-percentage-point lead over former President Donald Trump.

In the Swiss region, easing price pressures has boosted expectations of more interest rate cuts by the Swiss National Bank (SNB). Swiss annual Consumer Price Index (CPI) decelerated to 0.8% in September, the lowest in more than three years, despite the SNB reducing its key borrowing rates in each of the three meetings that took place this year.