USD/CHF remains capped below 0.7975 with the US Dollar on the defensive

• The US Dollar remains capped near lows, with upside attempts limited below 0.7975.
• Mounting tensions between the US and China keep the US Dollar on its back foot..
• In Switzerland, the SECO Economic Forecasts anticipate an economic slowdown in the second half of 2025.

The US Dollar bounced up from two-week lows near 0.7930 against the Swiss Franc earlier on Thursday, although upside attempts remain limited below the 0.7975-0.7980 area, as the escalating tensions between the US and China keep weighing on the US Dollar.

US President Trump added fuel to the fire in a TV interview on Wednesday, affirming that the US is already in a trade war with China. On Thursday, Treasury Secretary Scott Bessent lashed out at the Chinese trade negotiator, saying that he turned up uninvited in Washington and behaved in an “unhinged” manner.

The last episode of the Sino-US trade rift stems from China’s announcement of new restrictions on trade and Trump’s threat of 100% tariffs on China, and the latest developments are increasing concerns that the trade relationships between the world’s two major economies might reach a point of no return.

In the macroeconomic domain, the Fed’s beige book stated that the US economy remains resilient, although consumer spending is cooling slightly and employment creation has stalled, as businesses face headwinds from economic uncertainty and higher import costs.

In Switzerland, the SECO Economic Forecasts revealed that the country's Gross Domestic Product is expected to grow at a below-average 1.3% pace in 2025, weighed by a significant slowdown in the second half of the year. Next year, the economic growth is expected to decelerate further, to 0.9% growth. These figures add negative pressure to the CHF.