Economic wrap: Fed Chair Yellen rubber stamped a March hike - Westpac

Analysts at Westpac offered an economic wrap.

Key Quotes:

"US ISM services PMI rose from 56.5 to 57.6 (56.5 expected). New orders rose +2.6pts to 61.2 - the highest in 18 months, employment also firmed moderately (+0.5pts to 55.2), while prices edged lower (-1.3pts to 57.7).

Fed Chair Yellen rubber stamped a March hike with some plain speaking language, "...at our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.” An FOMC hike in March is looking highly likely barring a desperately weak payrolls/earnings update this Friday. Otherwise Chair Yellen covered familiar terrain, noting that the risks are "roughly balanced", the outlook warrants "gradual increases" and that activity should expand at a "moderate pace" in coming years. She did not discuss the balance sheet or Trump/fiscal risks.

Event Risk

NZ: building permits is volatile from month to month and not typically a market-mover. Overall, the construction sector pipeline remains robust.

Australia: Jan retail sales is likely another wobbly one (WBC forecast 0.2%) after monthly sales dipped 0.1% in Dec in a quarter that had seen a solid gain for volumes. Consumer sentiment dipped back into 'cautiously pessimistic' territory in Dec-Jan. Both the NAB and AiG surveys also show retailers struggling compared to consumer service sectors. On balance we expect Jan to show a modest 0.2% gain, mainly as the drag from household goods retail dissipates. Risks are mainly to the downside. Feb MI inflation gauge has been moving higher (currently at 2.0%yr) but we are yet to see this in the CPI measure. Feb ANZ job ads last came in at 4.0% with the annual pace at 7.0%yr, though still well off 2015 highs.

The US has Jan factory orders and finalised durable goods orders."