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China’s December trade data beat expectations and US Treasury yields on the rise given the increasing likelihood over a $2 trillion stimulus package

BLOG January 14, 2021 at 07:51 am (GMT)

• China’s December trade balance rose to $78.17 billion, beating expectations
• US Treasury yields continue to rise given Biden’s likelihood to increase the stimulus size
• GBPEUR recover last week’s losses as negative interest rates become unlikely

China’s trade balance in December landed at $78.17 billion, rising 6.5% and 18.1% for imports and exports respectively. The outsized increase in export growth fueled China’s trade surplus, bringing the 2020 total surplus to $316.9 billion with the US. China’s export data will likely have a spillover effect on AUD and NZD. Investors are hoping that both currencies could continue its outperforming trend against USD. Recently AUD has been largely benefited from the strong commodity prices, largely thanks to China’s construction demand.
While China’s trade data look promising, spotlights are on the fiscal spending in the US. 10-year Treasury yields climbed nearly 3% as, according to CNN, Biden will increase the stimulus package to somewhere near $2 trillion. Gold prices dropped below $1835 and AUD failed to sustain its upward movement on China’s trade data, eventually losing ground to the rising USD. On Wednesday, US also released its inflation data. CPI increased 0.4% in December after gaining 0.2% in November. An 8.4% jump in gasoline prices accounted for more than 60% of the inflation. The data were aligned with expectations. In 2020 as a total, CPI in the US rose 1.4%, the smallest annual gain since 2015.
In Eurozone, GBPEUR exchange rate has been climbing this week, largely attributable to offset concerns on the negative interest rates in the UK. For much of the past week, investors have been selling the Pound in fear of the Bank of England to introduce negative rates. Yesterday, BoE Governor Andrew Bailey expressed a certain level of hesitance on this tendency, leaving markets with much confidence that rates would probably remain in the positive region for a while.