China has raised its fiscal deficit target to 4% of GDP, up from 3%, while Germany has announced billions of euros in infrastructure and defence spending. These fiscal moves aim to stimulate economic growth and could offset concerns about potential spending cuts in the U.S., providing a boost to risk assets, including Bitcoin.
China expands fiscal stimulus
At the National People’s Congress, China set a 5% GDP growth target for 2025 and raised its fiscal deficit goal by 100 basis points. Premier Li Qiang emphasised the need to boost domestic demand and shift towards a consumer-driven economy. Analysts at ING suggest that maintaining this growth target indicates confidence in economic stability despite global headwinds.
Germany commits to infrastructure spending
Germany has abandoned its long-standing fiscal restraint, unveiling plans to inject hundreds of billions of euros into infrastructure and defence. According to Bloomberg economists, this shift could provide a much-needed boost to the struggling German economy, offering both short-term and long-term economic benefits.
Market impact and currency dynamics
Asian and European markets rallied in response to the fiscal stimulus announcements, and Bitcoin surged nearly 3% to $90,000. The moves also impacted global currency markets, putting pressure on the U.S. dollar.
Germany’s 10-year bond yield has jumped 36 basis points to 2.73%, narrowing the U.S.-German yield spread. This has lifted the EUR/USD exchange rate, contributing to broad-based dollar weakness. A weaker dollar could ease global financial conditions, encouraging risk-taking in financial markets and further supporting assets like equities and cryptocurrencies.
Credit: Coindesk (Text Excluding Headline)
