Weekly Market Letter Week of February 2–8, 2026

The Dow made history Friday, breaking 50,000 for the first time on a 1,206-point surge. The rally was driven by tech recovery after midweek selling and rotation into financials and industrials. Goldman Sachs and Caterpillar each contributed over 100 points to the price-weighted index. For the week, the Dow gained 2.5%, outperforming the S&P 500's 0.1% loss and Nasdaq's 1.8% decline.

What the price action suggests right now: The milestone reflects confidence in US economic resilience, but the divergence between the Dow's strength and tech weakness signals sector rotation rather than broad-based euphoria. The market appears to be rewarding value and cyclicals while reassessing high-multiple growth names.

Gold continued to consolidate after last week's historic crash, stabilizing in the $4,800–$5,000 range after plunging from record highs near $5,600 to lows around $4,400. The recovery has been tentative—prices recaptured $4,900 but failed to sustainably break above $5,000. Support came from lingering geopolitical uncertainty despite the US-Iran talks, while resistance reflects the stronger dollar following Kevin Warsh's Fed Chair nomination.

What the price action suggests right now: The violent correction appears to have found a floor, but the magnitude of selling suggests structural repositioning rather than a mere pullback. Price is testing whether buyers will defend the $4,800–$4,900 zone or if further consolidation toward $4,500–$4,600 is needed before the long-term uptrend can resume.

Oil posted its first weekly decline in seven weeks as the geopolitical risk premium deflated. WTI dropped from above $66 early in the week toward the low $60s as US-Iran talks reduced immediate supply disruption fears. Adding to the pressure, Saudi Arabia cut its official selling price for Asian crude to the lowest level since late 2020—though the smaller-than-expected reduction suggested confidence in demand. The fundamental backdrop remains challenging with projected oversupply of 3-4 million bpd for 2026.

What the price action suggests right now: The "war premium" has largely evaporated following diplomatic progress. Price is consolidating within a symmetrical triangle pattern between $62 and $65, awaiting the next catalyst. The fundamental oversupply picture suggests rallies may remain capped unless geopolitical tensions escalate again.

EUR/USD traded in a relatively narrow range, stabilizing near the 1.18 handle after January's rally toward multi-year highs above 1.20. Dollar strength following the Warsh nomination and hawkish Fed expectations capped euro gains, while the ECB's comfortable hold at 2.00% provided no fresh impetus. The pair found support from softer US data and growing speculation the Fed could cut as early as March.

What the price action suggests right now: The pair is consolidating after a strong January run, with price accepting levels around 1.18 but showing limited momentum for a push toward 1.19–1.20 without fresh catalysts. The broader trend remains euro-supportive given rate differentials, but near-term ranges may persist.

Sterling had a volatile week, dropping below $1.36 after the BoE's dovish hold before recovering. The narrow 5-4 vote split surprised markets expecting a clearer 7-2 hold, reviving expectations for faster rate cuts. Political uncertainty added to pressure after Prime Minister Starmer's appointment of Peter Mandelson as US ambassador drew scrutiny. The pound is down more than 1% for the week—its sharpest weekly decline since late October.

What the price action suggests right now: Cable's failure to hold above $1.37 and the sharp reaction to the BoE's dovish tilt signal that sterling bulls are vulnerable to policy disappointment. The pair found support near $1.36 but may struggle to reclaim recent highs without clearer UK growth signals.

The yen weakened past 157 per dollar heading into the weekend election, giving back more than half the gains from the suspected late-January intervention episode. PM Takaichi's landslide victory creates a mandate for continued expansionary fiscal policy, reinforcing concerns about Japan's debt trajectory. The yen remains caught between intervention risk above 158 and structural pressures from deeply negative real rates and Japan's pro-stimulus political backdrop.

What the price action suggests right now: The Takaichi victory removes political uncertainty but replaces it with fiscal concerns. Price is testing the upper bound of recent ranges, where intervention risk historically kicks in. The yen remains fundamentally weak, but authorities have shown willingness to act—creating a volatile two-way risk environment around the 155–160 range.

The Canadian dollar stabilized after retreating from 16-month highs near 1.35, finding support from Friday's strong labor report (unemployment at 6.5%, wages at 3.3%). However, falling oil prices and renewed dollar strength post-Warsh nomination limited loonie gains. The pair has settled into a 1.36–1.37 range as markets weigh Canadian economic resilience against commodity headwinds.

What the price action suggests right now: The loonie is finding a floor after January's strength, supported by domestic fundamentals but capped by oil weakness and the broader dollar recovery. The pair appears to be establishing a new equilibrium in the mid-1.36s after the tariff-driven extremes earlier in the year.