Australian Dollar remains higher after China's RatingDog Services PMI release

• China’s RatingDog Services PMI edged down to 50.8 in October, but the Australian Dollar maintained its footing.
• Readings below 50.0 in Australia’s services and composite PMIs pointed to a contraction in the private sector.
• Despite the RBA’s rate increase, US election uncertainty and deadlocked Iran peace talks pose downside risks.

China’s RatingDog Services Purchasing Managers’ Index (PMI) eased from 51.6 in September to 50.8 in October, indicating a modest slowdown in services growth. Following the release from Australia’s key trading partner, the Australian Dollar (AUD) remains firmer, helping AUD/USD retain its recent advance. The pair is trading near 0.6970 in Wednesday’s Asian session, recovering after two days of declines.

Weaker services activity and a broader slowdown in business conditions were evident in Australia’s economic releases. A decline in the S&P Global Australia Services PMI from 51.9 in September to 48.5 in October took the index to a seven-month low. It also marked the first reading below the neutral 50.0 level since May, although the figure exceeded the market forecast of 47.8. The S&P Global Composite PMI likewise retreated from September’s 51.3 to 48.2. While above the initial expectation of 47.7, the reading pointed to a return to contraction across manufacturing and services.

The latest interest rate increase by the Reserve Bank of Australia (RBA) is being overshadowed by political uncertainty ahead of the US midterm elections and the impasse in peace negotiations with Iran. Both continue to dampen investor sentiment, leaving AUD/USD exposed to potential headwinds despite its resilience so far.

With the first exit polls in focus, investors are looking for indications of whether Democrats will win control of the US House and Senate. They are also watching how US President Donald Trump responds to the final election outcome.

Dollar trades unevenly as currency-specific factors steer G10 markets

An increasing emphasis on currency-specific drivers, rather than broad macroeconomic narratives, is shaping the market backdrop. As strategists at Scotiabank put it, "G10 currencies continue to trade in mixed fashion as market participants focus on individual currency developments rather than broader themes," underscoring investors’ focus on developments affecting individual currencies.