Economic wrap: Yellen and CPI drive greenback - Westpac

Analysts at Westpac offerd an economic wrap.

Key Quotes:

"Fed Chair Janet Yellen, in her speech and Q&A to theJoint Economic Committee, said the case for a hike has strengthened, saying a rate hike could be appropriate "relatively soon". She also said that that delaying hikes too long could mean a faster pace of normalization in the future, and that keeping rates on hold could spur excess risk-taking.

On the economy, she said the data evidence is consistent with the Fed's outlook on improving growth and rising inflation, as outlined in the November statement. She deflected a question on the Fed's response to fiscal policy, saying it's up to Congress to determine the mix of policies. On her Fed term, she said there is no circumstance she can think of to cause her to end her term as Chair prematurely.

US CPI firmed to an annual pace of 1.6% (as expected), but the ex-food and energy measure slipped from 2.2% to 2.1% (vs 2.2% expected). Housing starts jumped 25.5% (vs 10.4% expected). Jobless claims were 235k (vs 257k expected), which is the lowest level of weekly claims for 43 years. That may reflect the holiday-shortened week. Philadelphia business activity fell from 9.7 to 7.6 (vs 7.8 expected).

Economic Event Risks Today

The event calendars are quiet today. NZ has ANZ consumer confidence, The ECB’s Dragh speaks, as do the Fed’s George, Dudley, Kaplan Powell and Bullard."