USD/CHF dips toward 0.8650 as the US Dollar weakens amid lower Treasury yields

• USD/CHF depreciates as the US Dollar loses ground amid lower Treasury yields.
• The recent poll indicated that Kamala Harris and Donald Trump are locked in a close contest across seven battleground states.
• The 10-year Swiss bond yield falls toward 0.38% due to rising expectations of more aggressive rate cuts by the SNB.

USD/CHF retraces its recent gains from the previous session, trading around 0.8650 during the European session on Monday. The US Dollar faces downward pressure as subdued Treasury yields follow Friday's weaker-than-expected US Nonfarm Payrolls report.

The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trading around 103.80 with 2-year and 10-year yields on US Treasury bonds standing at 4.17% and 4.31%, respectively, at the time of writing.

On the data front, the US Bureau of Labor Statistics (BLS) indicated that October's Nonfarm Payrolls increased by only 12,000, following a revised September gain of 223,000 (down from 254,000), which fell well short of market expectations of 113,000. Meanwhile, the Unemployment Rate remained steady at 4.1% in October, matching the consensus forecast.

Traders are closely watching the upcoming US presidential election on Tuesday, as the final New York Times/Siena College poll showed Democratic candidate Kamala Harris and Republican nominee Donald Trump are locked in a close contest across seven battleground states on Sunday. The focus will shift to the US Federal Reserve (Fed) policy decision, with expectations of a modest 25 basis point rate cut later this week.

The yield on the 10-year Swiss government bond dropped toward 0.38%, its lowest level since early October, as expectations grew for more substantial rate cuts by the Swiss National Bank (SNB). This shift follows a continued slowdown in Switzerland's inflation, with the Consumer Price Index (CPI) falling 0.6% year-over-year in October, below the 0.8% forecast and marking the slowest rate of increase since July 2021.

Swiss inflation has not risen since April, and October's figure came in well below the SNB's fourth-quarter inflation forecast of 1%. This raises the likelihood that the SNB may consider a larger rate cut in December to keep inflation within its target range of 0-2%, signaling concerns over potential economic softening.