China’s Politburo announced plans to implement a more active macro policy focused on enhancing domestic demand, stabilising the housing and stock markets, and managing risks from external shocks. These measures aim to encourage sustained economic recovery.

The Australian Dollar (AUD) has not shown much reaction, trading down 0.37% against the US Dollar at around 0.6215. Factors influencing the AUD include interest rates set by the Reserve Bank of Australia, the price of iron ore, and the overall health of the Chinese economy, which is Australia’s largest trading partner.

China’s economic performance significantly affects demand for Australian exports, impacting AUD value. Additionally, iron ore exports are crucial; in 2021, they accounted for $118 billion, with price fluctuations directly influencing the currency’s value.

Finally, Australia’s Trade Balance, the difference between exports and imports, also plays a role in AUD strength. A positive Trade Balance generally supports the currency, while a negative balance can weaken it.

What we see here is Beijing stepping in with fresh macroeconomic policies designed to support both consumer demand and financial stability. With an eye on turbulence from abroad, they are moving to ensure their markets—and by extension, those of key partners—remain steady. This shift naturally catches the attention of anyone trading in currencies and commodities, particularly those connected to Australia.

The Australian Dollar’s muted reaction so far suggests traders were either expecting these policies or are waiting for clearer signs of their impact. Despite this, it’s worth remembering that Australia’s financial health is deeply woven into demand from China, its biggest trade partner. Interest rate decisions from the Reserve Bank of Australia and fluctuations in iron ore prices add further layers of influence.

Iron ore continues to be a key driver. Back in 2021, Australia exported $118 billion worth of it, with price swings feeding directly into the AUD’s performance. When prices climb, exporters profit, and economic confidence rises, often giving the currency a boost. When prices fall, the opposite is true, leading to potential downward pressure.

Another metric to watch is Australia’s Trade Balance—the gap between what is sold abroad and what is bought from overseas. A surplus typically supports the local currency, reinforcing strength in the AUD, while a deficit can erode confidence.

For those trading derivatives, the best course of action in the coming weeks will depend on how effectively China’s measures translate into real economic movement. If demand for Australian exports increases, it will likely create upward momentum for the AUD. On the other hand, if sentiment remains weak, the currency may stay under pressure.

With multiple factors at play, watching how these policies feed through to Australia’s key commodities and overall trade flows will be essential in staying ahead.