USD/CHF extends losses amid trade tensions, Fed easing expectations

• The US Dollar remains under pressure amid escalating trade tensions between the United States and China.
• Growing expectations of faster Federal Reserve easing weigh on the Greenback.
• The Swiss Franc strengthens on safe-haven demand despite downbeat domestic data.

USD/CHF extends its losing streak for the fourth consecutive day, hitting a new one-month low at 0.7873 on Friday, before cutting losses following US President Donald Trump's comments on the trade dispute with China. The US Dollar (USD) remains fragile in a risk-off environment, as investors worry about the combined impact of escalating US-China trade tensions, the prolonged US government shutdown, and mounting expectations that the Federal Reserve (Fed) will accelerate its monetary easing in the coming months.

The US Dollar Index (DXY), which tracks the Greenback's performance against a basket of major currencies, falls to a one-week low. Traders have now fully priced in two additional Fed rate cuts by the end of the year, according to the CME FedWatch tool, following the Fed's Beige Book report, which pointed to slowing consumer spending and a weakening labor market.

On the political front, the US government shutdown deepens after the Senate rejected for the tenth time a short-term funding bill proposed by the House of Representatives on Thursday. The ongoing fiscal stalemate fuels economic uncertainty and adds further pressure on the US Dollar.

At the same time, relations between Washington and Beijing continue to deteriorate. US President Donald Trump threatened to raise tariffs on Chinese imports to 100% in response to China's new export restrictions on rare earths. Both sides also introduced reciprocal port fees earlier this week, stoking fears of a full-blown trade war.

Trump sent a more conciliatory message on Friday, however, telling Fox Business Network that a 100% tariff would not be sustainable and added that they have to have a fair deal with China, which helped the USD to rebound slightly.

"I think we're going to do fine with China," stated Trump, reiterating that he plans to meet Chinese President Xi Jinping in a couple of weeks when they are both in South Korea, but said he doesn't know what will happen.

In this tense context, investors are turning to safe-haven assets, boosting demand for the Swiss Franc (CHF) despite lackluster local data. Producer prices fell for the fifth consecutive month in September, while the State Secretariat for Economic Affairs (SECO) forecast Swiss Gross Domestic Product (GDP) growth at a modest 1.3% in 2025, weighed down by a sharp slowdown in the second half of the year.