The Australian dollar has been rising since last Friday and is in positive territory today. In the European session, AUD/USD is trading at 0.6801, up 0.37%.
The final week of the year, bookended by Christmas and New Year’s, is usually quiet, with reduced trading volumes and a very light economic calendar. Still, the Australian dollar managed to put together an end-of-the-year rally, rising around 2% since December 23rd.
Australia watching China reopening
The Chinese economy has been experiencing a slowdown in recent months, but this week brought some good news for the country. China announced that international tourists would no longer be required to enter quarantine upon arrival, marking another step in its rush to reopen after imposing a strict zero-Covid policy earlier last year.
This move is expected to invigorate China’s economy and provide long-term benefits as more people travel into the country and businesses start up again. Unfortunately, it has also led to an increase in Covid cases which have kept many people indoors and resulted in fewer workers being available at factories due to sickness or fear of infection. This could lead to a contraction of GDP during the first quarter of 2023 as reopening efforts are still relatively chaotic compared with other countries that have taken more gradual steps towards recovery from lockdowns imposed due to coronavirus pandemic restrictions.
AUDUSD On The Move
Despite these short-term challenges, HSBC projects 5% growth for 2023 thanks largely on account of easing lockdown measures like those just announced by China this week – allowing foreign visitors back into their borders without quarantine requirements – will help drive economic activity over time once domestic consumption increases further down the line too. As such while there may be bumps along the road ahead it appears that things are looking brighter for Chinese citizens both domestically and abroad who can now look forward to traveling freely again soon!
As the world’s second-largest economy, China has a massive impact on global markets. With Australia being one of its largest trading partners, it is no surprise that the country is watching developments in China closely.
The Chinese economy has been growing steadily over recent years, and this growth has had positive implications for Australia’s currency and exports. However, with reports suggesting that economic activity could weaken in Q1 2023 due to trade tensions between the US and China as well as the coronavirus outbreak that originated in the Wuhan province of China, there are concerns about how this will affect Australian businesses that rely heavily on exports to China for their income stream.
If these predictions come true, then we can expect to see a decrease in demand from Chinese consumers, which would lead to reduced export volumes out of Australia, resulting in lower profits for many companies operating within our borders. This would also hurt our currency exchange rate, causing fluctuations throughout 2023 and potentially leading us into recessionary territory if not managed correctly by both government authorities here at home and international bodies such as the IMF or World Bank.
Fortunately, there are some positives to all of this uncertainty surrounding Chinese economic performance, such as increased investment opportunities available on local stock exchanges due to higher volatility caused by a shift in market sentiment towards riskier assets, as well as a potential increase in tourism numbers due to an influx of new visitors looking to take advantage of low prices associated with a weaker AUD against other major currencies.
Overall, it’s clear why so many Australians AUD/USD are keeping a close eye on developments across the Pacific Ocean; only time will tell if the current situation translates into serious financial consequences for us here in Australia, but until then, we should best prepare ourselves for whatever may come!
- AUD/USD has support at 0.6703 and 0.6620
- There is resistance at 0.6841 and 0.6969