Aussie Steadies as Soft China Services Stays Expanding

Key Moments

Australian Dollar Holds Firm Despite Mixed PMI Signals

The Australian Dollar kept its recent gains intact on Wednesday in Asian trading, with AUD/USD hovering near 0.6970 after two straight days of declines. The move came even as fresh data from China showed only a modest expansion in the services sector, while Australia’s own activity gauges pointed to a downturn in private-sector momentum.

China, a key trading partner for Australia, saw its RatingDog Services Purchasing Managers’ Index (PMI) slip to 50.8 in October from 51.6 in September, indicating that services activity continued to grow but at a slower pace. Nonetheless, the Australian Dollar remained relatively firm following the release.

Australian PMIs Signal Renewed Private-Sector Contraction

Domestic indicators in Australia painted a weaker picture. The S&P Global Australia Services PMI dropped to 48.5 in October from 51.9 in September, sliding below the 50.0 level that separates expansion from contraction. This marked a seven-month low and the first sub-50 reading since May, although the outcome still surpassed market expectations of 47.8.

Broader business conditions also deteriorated. The S&P Global Composite PMI, which aggregates activity across manufacturing and services, fell to 48.2 in October from 51.3 in September. While the reading came in above initial forecasts of 47.7, it nonetheless signaled a renewed contraction across both key sectors of the economy.

Political Risks Offset Support from RBA Rate Hike

Looking ahead, the AUD/USD pair may confront additional obstacles. Ongoing uncertainty around the upcoming US midterm elections and a lack of progress in peace talks with Iran continue to dampen risk appetite. These factors have the potential to overshadow the supportive impact of the Reserve Bank of Australia’s most recent interest rate increase.

Market participants are tracking the first exit polls to gauge whether Democrats will secure control of both the US House and Senate, and to assess how US President Donald Trump will react to the eventual outcome of the vote.

G10 FX Driven by Currency-Specific Dynamics

In the broader foreign exchange space, trading in the US Dollar against its G10 peers has been uneven, as investors focus more on currency-by-currency developments than on a single overarching narrative. Strategists at Scotiabank observe that “G10 currencies continue to trade in mixed fashion as market participants focus on individual currency developments rather than broader themes,” highlighting an environment in which idiosyncratic drivers are increasingly in focus.

Understanding the RatingDog Services PMI

The RatingDog Services Purchasing Managers Index (PMI) is released monthly by Caixin Insight Group and S&P Global and serves as a forward-looking gauge of conditions in China’s services industry. The index is based on survey responses from senior executives at both private and state-owned enterprises, who report how current activity compares with the previous month.

Readings can signal shifts ahead of official indicators such as Gross Domestic Product (GDP), industrial production, employment, and inflation. The PMI ranges from 0 to 100, with a level of 50.0 indicating no change in activity from the prior month. Values above 50 suggest that the services sector is expanding, which is generally interpreted as positive for the Renminbi (CNY), while readings below 50 point to contracting activity, typically perceived as negative for CNY.