USD/CHF edges higher to near 0.8700 due to solid US Dollar

• USD/CHF rises as US Dollar advances amid higher Treasury yields.
• Fed's Daly stated that the economy is evidently in a stronger position, with a significant decline in inflation.
• Lower Swiss inflation strengthens the likelihood of the SNB delivering another rate cut in December.

USD/CHF appreciates and trades around 0.8680 during the early European hours on Wednesday. This upside of the pair could be attributed to solid US Dollar (USD). Additionally, improved US Treasury yields also contributed support for the Greenback and underpinned the USD/CHF pair.

The US Dollar Index (DXY), which tracks the US Dollar against six major currencies, is trading near a two-month high at 104.30. Meanwhile, yields on 2-year and 10-year US Treasury bonds are at 4.05% and 4.22%, respectively.

Recent indicators of economic strength and worries about a possible rebound in inflation in the United States (US) have reduced the likelihood of a substantial interest rate cut by the Federal Reserve in November. According to the CME FedWatch Tool, there is an 89% chance of a 25-basis-point rate cut, with no expectation for a more significant 50-basis-point reduction.

In a post on the social media platform X, Federal Reserve Bank of San Francisco President Mary Daly stated that the economy is clearly in a better position, with inflation having fallen significantly and the labor market returning to a more sustainable path.

Market participants expect another interest rate cut by the Swiss National Bank (SNB) at its upcoming December meeting. The continued slowdown in Swiss inflation strengthens the dovish sentiment surrounding the SNB. In September, the SNB reduced its key rate for the third time in a row by 0.25%, bringing it to 1%.