Amidst escalating geopolitical tensions between US and China over the Chinese balloon incursions, a Chinese official warned the US not to aggravate the tense situation.

This comes after US President Joe Biden’s administration lauded the Pentagon for shooting down an alleged Chinese spy balloon off the US Atlantic coast on Saturday.

In response, China angrily voiced its "strong dissatisfaction" at the move and said it may make "necessary responses."

Market reaction

The FX space is relatively unaffected by the US-China conflict but the Chinese stocks are down 1% to 2% so far. The US S&P 500 futures are shedding 0.35% on the day.

AUD/USD is steadily recovering ground above 0.6900, up 0.05% on the day.