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

• The Australian Dollar remained resilient as China’s RatingDog Services PMI edged down to 50.8 in October.
• Private-sector activity in Australia moved into contraction, with domestic services and composite PMIs slipping below 50.0.
• Despite the RBA’s rate increase, US election uncertainty and deadlocked Iran peace talks pose downside risks.

A firmer Australian Dollar (AUD) is helping AUD/USD recover after two consecutive days of declines, with the pair trading near 0.6970 in Wednesday’s Asian session. The pair retains its recent advance following economic releases from China, Australia’s key trading partner. At 50.8 in October, China’s RatingDog Services Purchasing Managers’ Index (PMI) was down from September’s 51.6, indicating a modest slowdown in services growth.

Weakness in Australia’s services sector and wider business activity was evident in the latest economic readings. The S&P Global Australia Services PMI came in at 48.5 for October, down from 51.9 in September and its lowest level in seven months. Although the reading exceeded market expectations of 47.8, it slipped below the neutral 50.0 mark for the first time since May. The S&P Global Composite PMI also declined, reaching 48.2 from September’s 51.3. That was above the initial estimate of 47.7, but still indicated a return to contraction in both manufacturing and services.

Further ahead, potential headwinds remain for AUD/USD despite its current strength. The Reserve Bank of Australia’s (RBA) latest interest rate increase is being overshadowed by political uncertainty ahead of the US midterm elections and the lack of progress in peace negotiations with Iran, both of which continue to dampen investor sentiment.

Attention is on the first exit polls for indications of whether Democrats will take control of the US House and Senate. Market participants are also monitoring how US President Donald Trump will react to the final election outcome.

Are currency-specific drivers keeping the Dollar mixed in G10 trading?

With investors paying greater attention to drivers specific to each currency than to broad macroeconomic narratives, Scotiabank strategists note that "G10 currencies continue to trade in mixed fashion as market participants focus on individual currency developments rather than broader themes," underscoring the fragmented market backdrop.