Speaking at the t World Economic Forum (WEF) in Tianjin on Wednesday, China’s Premier Li Qiang said that “Judging from key indicators, China’s economy showed a steady improvement in the second quarter.”
Additional quotes
Regardless of how the international environment evolves, China’s economy has ‘consistently maintained a strong momentum for growth.
We are confident in our ability to maintain a relatively rapid growth rate for China’s economy.
Aim for China to transition from a major manufacturing power to a mega consumer market.
That will open up vast, untapped markets for businesses in various countries.
Willing to share original technologies and innovative scenarios with various countries.
Hope all will engage in activities that benefit greater good, abide by market principles in all endeavors, persist in doing the ‘right thing’.
Urge all parties refrain from politicizing and securitizing economic and trade issues excessively.
Oppose decoupling, and focus on long-term goals.
Encourage all to seize opportunities presented by the current wave of technological innovation and industrial transformation.
China warmly welcomes enterprises from all over the world to invest in China, establish a strong foothold here.
Market reaction
AUD/USD is keeping its range play intact at around 0.6500 following these headlines.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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Editors’ Picks
EUR/USD strengthens above 1.1600 on risk-on mood
The EUR/USD pair edges higher to around 1.1615 during the early European session on Wednesday. The improved risk sentiment provides some support to the Euro against the Greenback. Traders will take more cues from the Federal Reserve’s Chair Jerome Powell testifies later on Wednesday.
GBP/USD holds gains above 1.3600 due to improved risk appetite
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