The Australian dollar and the S&P/ASX 200 stock index were shaken after White House trade adviser and outspoken China critic Peter Navarro said the trade deal between Washington and Beijing was “over”. The Australian dollar is sometimes viewed as a proxy for China, due to the the close economic ties between China and Australia.
Speaking on Fox News on Monday night, Mr. Navarro said the “turning point” took place in January, when “they had already sent hundreds of thousands of people to this country to spread that virus, and it was just minutes after wheels up when that plane took off that we began to hear about this pandemic.”
However, shortly after the interview Mr. Navarro walked back his remarks, saying they had been taken “wildly out of context.” He said; “They had nothing at all to do with the Phase 1 trade deal, which continues in place” before adding “I was simply speaking to the lack of trust we now have of the Chinese Communist Party, after they lied about the origins of the China virus and foisted a pandemic upon the world.” In addition, President Trump chimed in, tweeting: ‘The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!’ Stock indexes and risk currencies rebounded in response.
Risk-sensitive FX gets a bump
Risk-sensitive currencies including the New Zealand and Australian dollars had rallied sharply on Monday, while the safe-haven US dollar fell, as the market shrugged off negative news from the World Health Organization (WHO) and fears over a second wave of COVID-19.
The WHO reported a record increase in global coronavirus cases on Sunday, registering more than 183,000 new infections over a 24-hour period. According to the WHO, the largest rise in cases was in North America and South America. Director-General Tedros Adhanom Ghebreyesus stated on Monday; “It seems that almost every day we reach a new and grim record.” Meanwhile, data from Johns Hopkins University indicates that coronavirus COVID-19 global cases have risen to 9,100,994 with 472,539 fatalities.
Looking at the AUD/USD daily chart, we can see that a rising trendline and the 200-day moving average lie below current levels, representing support. Bulls are eyeing the 0.7061 level for a potential breakout to the upside.