China, Germany Unveil Massive Stimulus Packages, Boosting Bitcoin

In a significant shift in global fiscal policy, China and Germany have announced substantial stimulus packages, potentially offsetting the U.S.'s plans to cut spending. This move has sparked interest in the cryptocurrency market, particularly Bitcoin, as investors assess the implications for risk assets.

The National People's Congress in Beijing set a 5% GDP growth target for 2025 and raised the fiscal deficit target to 4% of GDP, indicating a commitment to boosting domestic demand and consumption. Premier Li Qiang acknowledged the challenging external environment but expressed confidence in stabilizing growth. ING analysts noted that the decision to maintain the 5% target signals policymakers' confidence in managing growth despite headwinds.

Meanwhile, Germany announced plans to unlock hundreds of billions of euros for defense and infrastructure investments, abandoning its fiscal rectitude. Bloomberg economists expect this shift to provide a cyclical boost to the German economy and notable long-term output gains through the infrastructure package.

The fiscal stimulus from China and Germany has been met with enthusiasm in global markets. Asian and European equity markets rallied, and Bitcoin surged nearly 3% to $90,000, defending its 200-day average.

The fiscal plans of China and Germany could also impact the foreign exchange market by putting downward pressure on the U.S. dollar. As countries increase borrowing, bond supply rises, driving yields higher and enhancing the appeal of their domestic currencies. Germany's 10-year bond yield has jumped 36 basis points since February 25, reaching its highest level since November 2023. This narrowing of the yield spread between U.S. and German government bonds has lifted the EUR/USD pair, spurring broad-based USD selling and pushing the dollar index below 105.00 for the first time since November.

Weakness in the U.S. dollar, a global reserve currency, tends to ease financial conditions worldwide, encouraging increased risk-taking in financial markets. As China and Germany fire their fiscal rockets, investors are watching closely to see how these developments may influence Bitcoin and other risk assets in the coming months.