The Australian dollar exchange rate was stuck under the level of 0.7750 to the US dollar. That happened in the yesterday sale or especially after the new incident which makes the relationship between China and Australia is worse.
Until now, both of these countries have long reciprocated small trade sanctions. That is why; this new information is also limiting the Aussie rally space. China announced something crucial yesterday
They declared a suspend of the important economic dialog with Australia. The topic of that dialog is “China – Australia Strategic Economic Dialogue”. They suspend the event because of a reason.
Is It The Australia’s Threat Response?
Many parties think that the suspended even is a response from China. It is because at the beginning of this week Australia also Threatening to cancel the 99 years lease agreement to a Chinese company.
The reason is a national security threat. Furtherore, it is also possible that the situation is taken as a response from China about the Australian decision to exit from the Belt and Road initiative.
For more than the last one year, China has been blocked and /or increasing the import costs of some goods from Australia. However, so far Beijing still order the iron ore and other vital raw materials.
Beijing is still ordering them from that Kangaroo country. The actions taken between those places has been limiting the rally potention of the AUD/USD. The further situation may appearss.
Several Orders Are Stable
Amidst everything happened, the demand of the iron ore is quite stable. Furthermore, it has a possibility for dampening the problem between China and Australia. How the thing is possible?
Iron ore is actually the number one export commodity in Australia and it becomes one of the butresses of a massive infrastructure builds in China. In fact, they don’t have too many alternatives.
The option is exporting the Australian iron ore this year or next year. That becomes they key sale which can avoid the total crack in their relationship. It was stated by an analyst.
However, there are still some other factors that influence the AUD/USD. Those ate like the global economic recovery prospect and the interest rate issue. It is especially in America and Australia.
The Risk-On Sentiment is Coming Back
The risk-on sentiment is coming back again. That condition is profitable for the AUD. However the dovish attitude of the Australian central bank has a possibility to create the bearish risk.
It is especially if the Federal Reserve starts its tapering as what Janet Yellen recommended lately. The United States employment data from the ADP version increases by 742,000 in April.
That is higher than the prediction of 800,000. However, the ADP employment change data this time is the highest one since September 2020. The COVID-19 vaccine implementation has a positive impact.
It is in the employment market recovery acceleration. Meanhile the American Non-manufacturing PMI data release from ISM showed the slow activity for the service sector.
PMI Data Is Still in The Expansion Zone
Aside from that, the United States service PMI is still in the expansion zone and becoming the second strongest point after the highest record reached last week. The declining position can be caused by a thing.
It is the lack of input in the middle of the increasing demands which is supported by the Government fund package and the quick COVID-19 vaccination. The amount of that financial package is $1.9 trillion.
Before the index of dollar moved stable in 91.31 which is not far from the highest level in April 30th. The slow movement of that main currency is caused by the NFP data which was anticipated by the market.
