Weekly Roundup: American Inflation Rises and China Shows Stronger Numbers

Considering the importance of Wednesday’s data from the USA, this hasn’t been an especially volatile week for most major markets. Participants might be awaiting the change of government in the USA early next week. There has been some action in Chinese data recently, though, with balance of trade, GDP and more generally beating the consensus in the last few days. This article summarises the context and effects of these key releases then looks briefly at the charts of XAUUSD and USDCNH.

As expected, American headline annual inflation continued to rise in December:

With the rate of non-core inflation rising consistently for three months in a row, it appears that the trend of falling inflation is now over. As a result, the Fed could slow down plans to loosen rates further this summer and not call for another cut until autumn.

Traders are looking ahead eagerly to the inauguration of Donald Trump as president of the USA on Monday 20 January. In the aftermath of the ceremony, there’s likely to be firmer information on the extent and size of incoming tariffs on imports. These are likely to drive further inflation in the USA and generate headwinds for the country’s major trading partners at least to some degree.

There’s some evidence of a last-minute rush to complete shipments in China ahead of the tariffs:

5.4% annual growth in China’s GDP for the fourth quarter was the best in 18 months and beat expectations by nearly half a percent. It appears to demonstrate that fiscal and monetary stimulus launched in the second half of 2024 is starting to work, but there was a significant impact from the large rise in exports last month as producers sought to preempt tariffs. Quarterly growth at 1.6% met the consensus.

The overall picture for the world’s two largest economies is broadly positive with no sign of upcoming recession for now. While the USA’s growth was a lot better than China’s last year, the Fed faces challenges in keeping inflation from resurging. Unemployment in China remains relatively high at 5.1% compared to 4.1% in the USA.

With Donald Trump taking office soon, the focus of many traders is likely to shift more onto politics and specifically other countries’ reactions to new tariffs. Even before Mr Trump takes office, Joe Biden’s government increased restrictions on exports of some types of powerful chips to China and escalated rhetoric about Chinese subsidies for shipbuilding. The Chinese government reacted by tightening controls on exports for a number of American companies operating there. These issues are very likely to escalate further in the next few weeks.

Gold Gains as US-China Rhetoric Grows Louder

Gold pushed above $2,700 even in the aftermath of higher American inflation as traders widely expect inflation to accelerate further after new tariffs are introduced and sentiment remains very strong overall. Weaker than expected retail sales in the USA also gave some support to the metal.

There were two unsuccessful tests of the area around $2,720 in late November and mid December 2024, so this looks like a fairly strong resistance which might make the price pause at least if not retrace lower, especially in the current overbought conditions. If it manages to break through, there’s no other obvious resistance before the latest all-time high around $2,790.

The shrinking value area of the 20, 50 and 100 SMAs is an important dynamic support, while the 100% Fibonacci extension around $2,545 is even more important now that the 200 SMA is also in this area. However, another failed test of $2,720 seems more likely to lead to a retracement or consolidation than an immediate reversal into a downtrend. With no major data due from the USA next week, the traders are likely to concentrate on politics and particularly firm plans, if any, for tariffs.

Dollar-yuan’s Momentum Decreases After Better Chinese Data

Much stronger GDP and exports from China gave some support to the offshore yuan in the last few days but not enough to realise a notable recovery. There remains some concern over the job market in China while traders are also widely anticipating negativity from new American tariffs in the next few months.

USDCNH hasn’t made a clear new high in 2025 and remains close to the 18-year high around ¥7.37, so traders should be aware that a false breakout is quite likely in this situation. There’s no longer an overbought signal from the slow stochastic but at around 70 this remains close to the zone of buying saturation.

Both the 20 and 50 SMAs are important dynamic areas of support, having supported the uptrend in the fourth quarter of 2024. Static supports might occur around ¥7.30 and ¥7.19.

How the price moves in the next few days depends mainly on the potential for escalation of economic disputes between the USA and China. Traders will also monitor the statement from the People’s Bank of China on 20 January for more context on its outlook for the economy.

This article was submitted by Michael Stark, an analyst at ExnessExness.

The opinions in this article are personal to the writer. They do not reflect those of Exness or FX Empire.