Business News: DailyFX US AM Digest: British Pound Drops on Retail Sales Dollar Lower with US Yields

The US Dollar (via DXY Index) has seen its losses from Wednesday, triggered by a round of US weaker than expected housing data, trickle into Thursday absent any new bullish developments in the past 24-hours otherwise. As September US economic data has started to roll in, it’s becoming increasingly clear that Hurricanes Harvey and Irma will have had a materially negative impact on Q3’17 GDP. Yesterday, the Atlanta Fed, New York Fed, and St. Louis Fed all downgrading their Q3 US GDP estimates after Wednesday’s data.

Ahead of the US open, the US Dollar’s weakness after Wednesday’s data has been reinforced by a pullback in US Treasury yields. The US Treasury 2-year yield is down 3-bps today after rising to its highest level of the year yesterday, and its highest level since 2008.

The Euro continues to drift higher as traders stake out positions ahead of the ECB’s October policy meeting, one week from today. The Catalan independence movement appears to be evolving into a new phase of struggle between the regional Catalonia government and the federal Spanish government, but thus far the probability of contagion is low and thus any impact has been contained locally to Spanish Bonos and the IBEX 30.

The British Pound slipped earlier following a round of retail sales data that showed consumption trends are weaker than anticipated. Like the US economy, nearly 70% of headline UK GDP comes from consumption. The combination of higher inflation and weaker consumption may create a policy dilemma for the Bank of England, throwing a wrench into their best laid plans to raise rates in November.

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