The USD bounced after the mix of data, where jobless claims fell, versus expectations for a small increase, and the Philly Fed index rose, against expectations for a decrease. Housing starts were a bit light of forecast, though appear to have been more than offset by the other data points. EURUSD has fallen to sub 1.0600 lows from near 1.0670, with the euro also weighed down by dovish Draghi comments.
The 11.3% U.S. December housing starts pop, after a slightly revised two-month gyration and a 0.2% permits drop, left a slightly stronger than expected report. The December bounce was led by multi-family starts and was capped by weakness in the south, with a likely boost from warm-weather before a late-December cold-snap that extended into January. Completions fell 7.9% in December after big prior gains that were concentrated in the Midwest and south. We expect housing starts to grow at a 4% rate in Q1 after a 27% rate in Q4, while permits climb at a 4% rate in Q1 after a 20% rate in Q4. Completions should fall at a 1% rate in Q1 after a 46% surge in Q4. Starts under construction, which drive new home construction, rose 1.1% after a 0.8% (was 0.9%) November drop but a 1.9% (was 2.2%) October rise.
The January Philly Fed rise to a 2-year high of 23.6 extended the December spike to 19.7 from 8.7 in November. We similarly saw an ISM-adjusted Philly Fed surge to a 30-month high of 57.4 from 54.9 in December, 54.8 in November, and 51.9 in October. Gains were led by new orders, inventories and prices, but were widespread. On Tuesday, the Empire State headline slipped to 6.5 from an 8-month high of 7.6 in December, but the ISM-adjusted measure rose to 50.7 from 48.8.
The 15k initial claims drop to a remarkably tight 234k in the BLS survey week reversed the 12k bounce to 249k (was 247k) in the week of New Year’s from the 237k Christmas week reading. Claims are oscillating just above to the 43-year low of 233k in the Veteran’s Day week, and well below the 6-month high of 275k in mid-December.
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