SYDNEY, Jan 12 Reuters -- Stocks and commodities fell in relief on Wednesday and the dollar hit a six-week low after U.S. Federal Reserve Chair Jerome Powell sounded less hawkish than expected in testimony to Congress, while economic data showed more room for policy easing in China.
After beginning the year with a rout, the Treasuries have steadied, though a new test looms later in the day when the U.S. inflation data is expected to come in red hot.
Powell told a congressional hearing on his confirmation for a second term at the central bank that the economy could weather the COVID 19 surge and was ready for tighter monetary policy.
He did not go into any new details beyond what traders had already gleaned from the minutes of last month's Fed meeting, but that turned out to be enough to keep selling in the Treasury market and U.S. tech stocks.
One of the main takeaways was that the sense of urgency on tightening has not been clearly heightened compared to the last time we heard from Powell in December, analysts at NatWest markets said in a note.
The best sessions of 2022 went up 1.4% and 0.9%, respectively, for the Nasdaq and S&P 500.
S&P 500 futures rose 0.2% in the Asia session and European futures rose 0.8%. The futures of the FTSE rose by 0.6%.
In the bond market, the 10-year Treasury yields were steady at 1.7321% and had pulled back more than 7 basis points bps from an almost two-year high on Monday.
Commodities caught a boost and oil touched pre-Omicron highs in Asia.
For the first time in two months, crude futures touched $84 a barrel and U.S. crude futures went up slightly to $81.69 a barrel.
While traders are bracing for headline U.S. inflation to hit an almost four-decade high of 7% a year-on-year, a softer than expected reading on prices in China has drawn bets on policy easing.
The five-year Chinese government bond futures rose eight ticks to an 18 month high. Yuan gains were also capped.
The U.S. data is due at 1330 GMT, though Powell already sketched a timeline for higher rates and balance sheet runoff in the year ahead, it is not clear how it will affect the outlook or move markets.
The dollar has dropped above its 200 day moving average against a basket of currencies overnight, touching a six week low of 95.538 on Wednesday.
It is also at a low against the euro, at $1.1378. It has stabilized at 115.33 yen but is slipping on the Aussie and Kiwi.
Jane Foley, the currency strategist at Rabobank, said there was already a lot of hawkish news in the price.
Before finding direction, the dollar may need to see some pullbacks and news on the interest rate front. As investors see Britain overcoming a wave of COVID 19 cases led by the Omicron variant, the pound has surged and touched a two month top of $1.3645 in Asia, having priced in a nearly 80% chance of a Bank of England rate hike in February.
The dollar's weakness has helped gold, though it is still hemmed in a range it has kept for half a year, at $1,820 an ounce.
The support for the currency held at $40,000 this week and investors were positive that the currencycurrencies were steady. The last time you bought it was $42,720.