USD/CHF drifts higher above 0.8650 amid bullish US Dollar

• USD/CHF trades in positive territory around 0.8655 in Monday's early European session. 
• The bets of a less aggressive Fed rate cuts support the USD.
• The Middle East geopolitical tensions could boost the Swiss Franc. 

The USD/CHF pair trades on a firmer note near 0.8655 on Monday during the early European trading hours. The prospect that the US Federal Reserve (Fed) will proceed with modest rate cuts over the next year underpins the Greenback against the Swiss Franc (CHF). However, the ongoing geopolitical tensions in the Middle East might cap the pair's upside. 

A shift in Fed policy expectations to a more moderate easing phase after a slew of stronger-than-expected US economic data provides some support to the US Dollar (USD) broadly. Meanwhile, the US Dollar Index (DXY), measuring the USD's value against six major currencies, currently trades near the three-month high of 103.60. 

US rate futures have priced in a 95% odds that the Fed will cut rates by 25 basis points (bps) in November, and a 5% chance that the US central bank will hold its rate, according to LSEG estimates. "Speculation that the Fed could follow September's 50 bps rate cut with another similarly sized move has been blown away by a round of data pointing to a resilient U.S. economy," noted Jane Foley, head of FX strategy, at Rabobank in London.

On the Swiss front, the uncertainty surrounding the US election and geopolitical risks might prompt higher demand for safe-haven currencies like the CHF. The local news agency Aljazeera reported early Monday that the Israeli army launched a series of new air strikes across Lebanon, including Beirut's suburbs, after it announced the targeting of Hezbollah's al-Qard al-Hassan financial institution's offices.