Australian Dollar holds gains following China's RatingDog Services PMI data

The Australian Dollar held ground despite China's RatingDog Services PMI falling slightly to 50.8 in October.
Australia’s domestic services and composite PMIs dropped below 50.0, signaling private-sector contraction.
US election risks and stalled Iran peace negotiations create headwind risks despite the RBA rate hike.

Akhtar Faruqui FXStreet

AUD/USD gains ground after two days of losses, trading around 0.6970 during Asian hours on Wednesday. The currency pair holds its recent gains as the Australian Dollar (AUD) remains stronger following economic data from China, Australia’s key trading partner. China's RatingDog Services Purchasing Managers’ Index (PMI) fell to 50.8 in October from 51.6 in September, reflecting a slight moderation in services expansion.

Australia’s economic indicators pointed to a softening service sector and broader business activity. The S&P Global Australia Services PMI dropped to 48.5 in October from 51.9 in September, hitting a seven-month low and dipping below the 50.0 neutral threshold for the first time since May, though it managed to top market forecasts of 47.8. Similarly, the S&P Global Composite PMI fell to 48.2 from 51.3 in September, beating initial expectations of 47.7 yet signaling a renewed contraction across both manufacturing and service industries.

Despite current resilience, the AUD/USD pair could encounter headwinds moving forward. Political uncertainty surrounding the upcoming US midterm elections and stalled peace talks with Iran continue to weigh on investor sentiment, overshadowing the Reserve Bank of Australia’s (RBA) latest rate hike.

Market participants are closely watching the first exit polls to see if Democrats will capture the US House and Senate, as well as how US President Donald Trump will respond to the final election results.

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Economic Indicator

RatingDog Services PMI

The RatingDog Services Purchasing Managers Index (PMI), released on a monthly basis by Caixin Insight Group and S&P Global, is a leading indicator gauging business activity in China’s services sector. The data is derived from surveys of senior executives at both private-sector and state-owned companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for CNY.

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