USD/CHF remains below 0.8650, market caution emerges ahead of US presidential election

• USD/CHF remains steady due to market caution amid increased uncertainty surrounding the US election results.
• Improved US Treasury yields could have provided support for the US Dollar.
• The continued slowdown in Swiss inflation has increased the likelihood of a bumper SNB rate cut in December.

USD/CHF holds ground after registering losses in the previous session, trading around 0.8640 during the Asian hours on Tuesday. The US Dollar (USD) remains steady as traders adopt market caution amid increased uncertainty surrounding the US presidential election. Additionally, improved US Treasury yields also provide support for the Greenback.

The opinion polls indicate that former President Donald Trump and Vice President Kamala Harris are nearly tied. The outcome may remain unknown for several days following Tuesday's vote. Both Trump and Harris expressed confidence in their chances as they campaigned across Pennsylvania on the last frantic day of this exceptionally close presidential race.

The US Dollar Index (DXY), which measures the value of US Dollar against its six major peers, trades around 103.90 with 2-year and 10-year yields on US Treasury bonds standing at 4.16% and 4.29%, respectively, at the time of writing.

The Swiss Franc (CHF) may encounter difficulties as the likelihood of significant rate cuts by the Swiss National Bank (SNB) increases. This shift is driven by a continued slowdown in inflation in Switzerland, evidenced by the Consumer Price Index (CPI), which declined by 0.6% year-over-year in October. This CPI figure was notably below the SNB's inflation forecast of 1% for the fourth quarter, raising the chances that the SNB could implement a more substantial rate cut in December to keep inflation within its target range of 0-2%.