USD/CHF drifts lower to near 0.8750, Fed rate decision looms

• USD/CHF weakens to around 0.8750 in Thursday's early European session. 
• Investors brace for the US Fed rate decision on Thursday. 
• The safe-haven demand could lift the Swiss Franc against the Greenback. 

The USD/CHF pair softens to near 0.8750 during the early European trading hours on Thursday. Traders might prefer to wait on the sidelines ahead of the US Federal Reserve (Fed) interest rate decision on Thursday. 

The downside for the US Dollar (USD) might be limited as traders expect a Donald Trump presidency will push up inflation and reduce the pace of interest rate cuts. However, the markets might turn cautious later in the day ahead of the US Fed monetary meeting. The US central bank is widely expected to cut interest rates by 25 basis points (bps). According to the CME FedWatch tool, markets have priced in nearly a 98% possibility of a quarter-point reduction and near 70% odds of a similar-sized move in December. 

On the Swiss front, data released by the State Secretariat for Economic Affairs (SECO) on Tuesday showed that the seasonally adjusted Unemployment Rate in Switzerland arrived at 2.6% in October. The figure remained unchanged compared to September. 

The Swiss National Bank (SNB) Chairman Martin Schlegel said last week that the central bank could further cut interest rates to maintain price stability in the mid-term. Markets currently have priced in 72% odds for a 25 bps and a 28% chance for a 50 bps reduction in the December meeting.

Meanwhile, the uncertainty about the global economic outlook and the ongoing geopolitical risks might boost the safe-haven flows, benefiting the Swiss Franc (CHF). As the Middle East teeters on the verge of war, with Iran threatening to react to an Israeli attack on its territory earlier this month, there are worries that Trump's win could enable Netanyahu to hit Iran's nuclear facilities, something the Biden administration has cautioned against, per CNN.