The Reserve Bank of Australia (RBA) has kept its interest rate steady for the eighth consecutive month.

The Australian dollar weakened by nearly 1.5% today, nearing a three-month low, as the U.S. dollar surged following former President Donald Trump's lead over Vice President Kamala Harris early in the U.S. presidential race. The election outcome is expected to directly impact the U.S. economy and export-dependent countries. However, the RBA’s decision to maintain its interest rate hasn’t provided enough support for the Australian dollar to strengthen in the near term.

Australia's Composite PMI rose to 50.2 in October, up from 49.6 the previous month, signaling a slight expansion in private sector manufacturing and services activities. However, this growth is minimal compared to previous years, with the increase primarily driven by service activity, nearly offsetting the continued decline in manufacturing. The disparity between the two sectors remains due to new orders and employment. While cost pressures have slightly eased across both sectors, companies have opted to raise prices, pushing overall output inflation to its highest in three months.

In its latest meeting, the RBA held the policy interest rate at 4.35%, marking the eighth consecutive month without change and aligning with market expectations. The central bank stated that, although inflation has significantly declined, core inflation remains high, necessitating heightened vigilance regarding inflation risks. The bank has yet to decide on future monetary policy. It also emphasized that the current monetary stance must remain tight enough to ensure inflation returns to the central bank’s target range sustainably. While household consumption showed an uptick in Q3, it has not risen enough to drive inflation higher than anticipated.

Australia's annual inflation rate fell to 2.8% in Q3 from 3.8% in Q2, with inflation slowing down rapidly due to continued declines in electricity and fuel prices. Government policies supporting energy prices have benefited several sectors. Meanwhile, service sector inflation remains high at 4.6%, especially for alcohol and tobacco prices, while food inflation held steady at 3.3%.

Australia's 10-year government bond yield rose to 4.68%, in line with U.S. Treasury yields, which increased as Trump was expected to win the election. Investors anticipate that the Federal Reserve might cut interest rates by another 25 basis points, with another potential cut in December, as U.S. economic data continues to indicate growth opportunities and a strong labor market. In contrast, Australia’s labor market has slightly slowed, and manufacturing continues to show signs of deceleration, adding only modest pressure for inflation to return to the central bank’s target range.