The Aussie is assessing Chinese risks. Overview for 06.05.2021

AUDUSD is trying to decide on where to move and assessing deterioration in relations with China.

The Australian Dollar plunged against the USD on Thursday morning but managed to recover a little bit later. The current quote for the instrument is 0.7742.

Some alarming news came from China. According to the official statement from Chinese authorities, China is putting on hold all activities in the context of cooperation with Australia indefinitely. As the Chinese party said, “Recently, some Australian Commonwealth Government officials launched a series of measures to disrupt the normal exchanges and cooperation between China and Australia out of Cold War mindset and ideological discrimination”. One could only guess what exactly it is about – China is using a platitude and not going into detail

Probably, it has something to do with what happened back in 2020, when the formal relations between China and Australia started deteriorating. At that time, China fended off Australia’s call to investigate the coronavirus pandemic origin. At first, China restricted Australian export. In 2021, Australia decided to terminate two agreements madу earlier as a part of the “One Belt and One Road” initiative.

Complications in Chinese-Australian relations may result in a slowdown in the Australian GDP recovery, as well as a drop in the export. China has always been Australia’s key trade and economic partner. 

For the Aussie, news from China is moderately negative but the situation may become clearer after China announces which particular projects and lines of cooperation it is planning to stop.