How strong is too strong?

• The yen strengthened to roughly 152 per dollar on Tuesday, while the euro briefly surged above $1.20 for the first time in four years, though excessive euro strength could hurt EU industrial exporters and complicate ECB policy ahead of next Thursday's meeting
• Tech mega-cap earnings this week showed investors remain comfortable with massive AI spending despite mixed results from Meta, Microsoft, Apple and Tesla
• Oil prices rose approximately 15% in January amid rising Middle East tensions and potential U.S. military action toward Iran, though crude is unlikely to break out of its narrow price band without demand improving

Market Summary: Dollar Volatility and Fed Leadership Change

Key Developments

U.S. Dollar Movements: The greenback fell to its weakest level since early 2022 on Tuesday, initially triggered by expectations of U.S.-Japan currency intervention. President Trump stated the dollar would "find its level," while Treasury Secretary Scott Bessent provided stabilizing commentary Wednesday. The dollar had appreciated nearly 50% in the decade before 2024.

Federal Reserve Leadership: President Trump announced Kevin Warsh, former Fed Governor, as his choice to replace Jerome Powell as Fed Chair. Warsh is perceived as less favorable to radical monetary easing than other candidates, calming market concerns.

Currency Markets: The yen strengthened to approximately 152 per dollar Tuesday before retreating. The euro surged above $1.20 for the first time in four years, raising concerns for EU industrial exporters ahead of the ECB meeting next Thursday.

Corporate & Sector News

Big Tech Earnings: Meta, Microsoft, Apple, and Tesla reported mixed results this week. The key takeaway: investors remain comfortable with massive AI spending commitments.

Energy Markets: U.S. natural gas prices spiked amid Arctic weather, affecting global LNG markets. Oil prices rose roughly 15% in January on Middle East tensions toward Iran, though crude remains range-bound.

Trade & Policy: The EU and India announced a trade agreement; Britain and China celebrated a diplomatic "reset." European countries agreed to jointly develop offshore wind infrastructure to reduce energy dependence.

Fed Meeting

The Federal Reserve held rates steady as expected in what observers termed a "snooze-fest," with Chair Powell offering limited commentary on Fed independence debates.

Market Implication: Currency volatility and Fed leadership transition create near-term uncertainty, while sustained tech sector AI investment signals continued confidence in long-term growth drivers.