Yen Jumps on Intervention Hint; Dollar Holds Firm on Fed Outlook

The explosive growth of artificial intelligence is pushing America's power grids to their limits, creating a political firestorm over rising residential electricity bills. In response, the Trump administration and several Northeastern states are advancing an unprecedented plan to compel technology companies to directly fund the construction of new power plants.

This move aims to solve a critical dilemma: how to supply the massive energy needs of data centers without forcing households and small businesses to shoulder the cost.

AI Boom Fuels Power Grid Crisis

The nation's largest regional power grid, PJM Interconnection, is at the epicentre of this challenge. Serving 67 million customers primarily in the Northeast, PJM is already home to the world's biggest concentration of data centers in northern Virginia and projects a 17% jump in peak electricity demand by 2030.

This surge in demand is already hitting consumers. The average U.S. retail price for electricity climbed 7.4% in September to a record 18.07 cents per kilowatt-hour. Residential prices have risen even faster, jumping 10.5% between January and August 2025—one of the largest increases in over a decade.

President Trump has made the issue a focal point, insisting that the tech giants driving this demand must "pay their own way." In a recent social media post, he wrote, "I never want Americans to pay higher Electricity bills because of Data Centers."

The Plan: An Emergency Auction for Big Tech

To address the crisis, the administration and state governors will direct PJM to hold an emergency wholesale electricity auction with unique terms designed for data centers.

How It Works

The proposal outlines a special one-time auction with several key features:

• 15-Year Contracts: Tech companies would bid on long-term, 15-year contracts for new electricity generation capacity, a significant departure from PJM's standard 12-month auctions.

• Guaranteed Revenue: Winning bidders would pay for the power over the contract's duration, regardless of whether they use it. This provides secure, long-term revenue streams needed to finance the construction of new power plants, estimated to be worth around $15 billion.

• Targeted Bidders: The auction would be designed specifically for data center owners and operators.

This "reliability backstop auction" is intended as a one-time emergency intervention. The White House and governors are urging PJM to hold the auction by the end of September.

Industry Reaction and Market Impact

While the plan is being pushed by political leaders, the grid operator itself appears to be on the sidelines. "We were not invited to the event they are apparently having tomorrow and we will not be there," said PJM spokesman Jeffrey Shields.

However, industry analysts believe the combined pressure from the White House and a bipartisan group of governors will be difficult for PJM to ignore. Timothy Fox of ClearView Energy Partners noted that this pressure is "very likely to motivate a considerable response" from the grid operator. Joe Bowring, president of PJM's independent monitor, called the idea a "significant improvement and a logical extension" of existing concepts.

Winners and Losers

The plan could fast-track the development of new natural gas and potentially even Small and Modular Nuclear Reactors by guaranteeing profits. However, the impact within the tech industry may be uneven.

• Large Hyperscalers: Giants like Amazon, Google, and Microsoft are better positioned to absorb these new costs or pass them on to their cloud customers.

• Smaller AI Firms: Companies such as Nebius and CoreWeave, which operate on multi-year contracts, could face squeezed margins as they are forced to absorb higher electricity costs.

The initiative is also expected to help PJM improve the accuracy of its demand growth forecasts. By forcing tech companies to financially commit to new power plants, the plan could weed out the speculative data center projects that have previously skewed projections.

A Bipartisan Political Push

The involvement of Democratic governors, including Pennsylvania's Josh Shapiro and Maryland's Wes Moore, lends the initiative bipartisan weight. The administration views this cooperation as crucial for anchoring the effort, as state policies have heavily influenced the retirement of coal and gas plants.

This plan follows a period of intense political focus on PJM's auctions after prices hit record levels in 2024. The grid operator's most recent auction in December fell 6.6 gigawatts short of securing needed supplies, a failure PJM attributed to the frenzy of data center construction.

While the "statement of principles" signed by the administration and governors is not a legally binding document, it carries significant weight. Officials have reportedly discussed the plan extensively with all stakeholders, from PJM executives and Wall Street to power developers and the hyperscalers themselves, signaling a determined effort to shift the cost of powering AI away from the average household.

The Trump administration has declared its intention to keep America’s coal power plants fully operational, framing the policy as critical for meeting a surge in electricity demand and supporting a national industrial comeback.

"The goal is 100% open," stated Interior Secretary Doug Burgum during the first meeting of the newly revived National Coal Council. "That's the standard we are operating against."

President Donald Trump has prioritized a coal resurgence in his second term, re-establishing the advisory panel that the Biden administration had allowed to expire. This push includes direct interventions, such as requiring certain power plants to continue burning coal.

This optimistic outlook from the administration stands in stark contrast to the more skeptical view held by market analysts, who point to the persistent economic advantages of natural gas and renewable energy sources. The administration's pro-coal messaging comes as it grapples with rising electricity costs, a key political concern ahead of the November elections.

Policy in Action: Forcing a Coal Comeback

To achieve its goals, the Trump administration has rolled out a series of aggressive measures designed to support the existing coal fleet.

Energy Secretary Chris Wright credited these actions, including short-term emergency orders, for keeping plants online. "Seventeen gigawatts of coal generation are open today that would not have been open," he said, vowing, "You will not see those coal plants close during this administration."

Key initiatives include:

• Emergency Orders: The Energy Department has issued mandates requiring some coal plants to continue operating.

• Regulatory Rollbacks: The administration has dialed back regulations and subsidies that favored emissions-free renewable power.

• Federal Funding: A fund of up to US$525 million (RM2.13 billion) has been allocated to upgrade existing coal-fired plants or build new ones.

• State-Level Intervention: The Environmental Protection Agency recently blocked Colorado's attempt to shut down a coal plant within the state.

• Expanded Leasing: The Interior Department is opening more federal land in North Dakota, Montana, and Wyoming for coal leasing.

Wright noted that utilities are now contacting the Energy Department seeking support to keep their plants running, even as some states push for their closure. Burgum, who leads the National Energy Dominance Council, even predicted the construction of new coal plants—a possibility most analysts have dismissed.

Market Realities vs. Political Ambition

Despite the administration's efforts, the long-term outlook for coal remains challenged by fundamental market forces.

"We need the power, and the coal units are there now," acknowledged Andy Blumenfeld, a director at McCloskey by Opis. "But in the long term, they are up against an ageing coal fleet." He noted that many plants are old and will need costly maintenance to stay in service, while natural gas and nuclear capacity are expected to become more available.

Historically, coal has seen a dramatic decline. Once the source of over half the country's electricity, its share dropped to roughly 17% in 2025 and is projected to fall to 15% this year.

While a recent boom in US electricity demand provided a short-term boost for coal, with generation climbing 13% last year due to high natural gas prices, government forecasts predict the downward trend will resume in 2026.

AI and Data Centers: A New Lifeline for Coal?

The administration is linking coal's future to national strategic goals, including winning the artificial intelligence race against China. The immense power consumption of data centers, which are essential for developing AI, is being presented as a new, urgent justification for maintaining the coal fleet.

"The objective is the data centres, and how we are going to figure out how to power them," said Randall Atkins, CEO of coal supplier Ramaco Resources and a member of the National Coal Council.

During the council meeting, executives warned against over-reliance on natural gas and stressed the need to protect America's mines while keeping electricity prices under control.

The Financial Headwind: ESG and Legal Battles

A significant threat to the administration's coal strategy is emerging from the financial sector. Energy Secretary Wright warned that court-mandated divestment of coal assets by major asset managers could seriously undermine the industry.

This concern stems from a lawsuit alleging that BlackRock Inc., Vanguard Group Inc., and State Street Corp.'s asset management arm colluded to reduce coal output in violation of antitrust laws. The lawsuit, led by Texas Attorney General Ken Paxton, targets the firms' participation in environmental, social, and governance (ESG) initiatives and carbon-reduction alliances.

Former Trump energy secretary Rick Perry predicted that a successful lawsuit could force an estimated US$18 billion in coal holdings off these firms' books. He warned such an outcome would pose "a direct threat to coal companies' ability to raise capital, finance infrastructure and support jobs."

Malaysia's economy posted unexpectedly strong growth in the final quarter of the year, driven by its robust services and manufacturing sectors. This performance helped the country's full-year expansion surpass official government targets, showcasing resilience in the face of challenging U.S. trade tariffs.

Q4 and Full-Year Growth by the Numbers

Advance estimates from Malaysia's Department of Statistics reveal that gross domestic product (GDP) expanded by 5.7% year-on-year in the October-December period. This figure comfortably beat the 5.4% median forecast from a Bloomberg survey.

For the full year, the economy grew by an estimated 4.9%, exceeding the government's projected range of 4% to 4.8%. The final, official figures are scheduled for release on February 13.

Domestic Strength Fuels Economic Resilience

The economy's solid performance was anchored by strong internal dynamics. Key drivers included solid domestic demand, the lowest unemployment rate in over a decade, and resilient overall exports. Malaysian officials are counting on private consumption to continue fueling growth in 2026.

Navigating Global Trade Headwinds

Despite the positive results, the trade-reliant nation remains vulnerable to global volatility, including the impact of a 19% tariff imposed by U.S. President Donald Trump. This pressure is evident in the country's exports to the United States, which contracted in both October and November.

Still, Malaysia's latest data adds to evidence that export-oriented economies in Southeast Asia are withstanding the tariff impact, with Singapore and Vietnam also reporting strong growth. Looking ahead, the Malaysian government anticipates a slower expansion of 4% to 4.5% for the current year, acknowledging heightened global risks.

Canadian Prime Minister Mark Carney and Chinese leader Xi Jinping have launched a new strategic partnership designed to deliver "historic" gains by leveraging the strengths of both nations, a major development announced in Beijing on Friday.

Carney, the first Canadian prime minister to visit China since 2017, is on a mission to rebuild ties with Canada's second-largest trading partner following a period of diplomatic tension.

A New Partnership in a Time of Division

During the meeting, Carney emphasized the importance of the new alliance in the current global climate. "It is important to start this new strategic partnership at a time of division," he told Xi, calling for a focus on mutual benefits.

The visit signals a concerted effort to move past earlier friction and establish a more robust economic and diplomatic relationship.

Key Sectors for Immediate Progress

The partnership will prioritize cooperation in specific fields where both countries can see tangible results. Carney identified several key areas poised for growth:

• Agriculture and agri-food

• Energy

• Finance

"That is where I believe we can make immediate and sustained progress," he added, outlining a clear path for the collaboration.

A Strategic Response to US Tariffs

The move toward closer Canada-China ties is set against a backdrop of trade pressure from the United States. Since returning to the White House last year, US President Donald Trump has imposed tariffs on both Canadian and Chinese goods.

For Canada, strengthening its relationship with the world's second-largest economy is a strategic pivot, particularly after Trump also suggested the longtime ally could become the 51st US state. For China, which has been similarly hit by US tariffs, securing cooperation with a Group of Seven (G7) nation provides a key partnership in a traditional sphere of American influence.

Venezuelan opposition leader Maria Corina Machado met with U.S. officials in Washington to discuss the country's political future.

In a striking diplomatic gesture, Venezuelan opposition leader Maria Corina Machado presented her Nobel Peace Prize medal to U.S. President Donald Trump during a White House meeting on Thursday. The move is a clear attempt to build influence with the president as he shapes U.S. policy toward the South American nation.

A White House official confirmed that Trump plans to keep the medal. The president acknowledged the gift in a social media post, writing, "Maria presented me with her Nobel Peace Prize for the work I have done. Such a wonderful gesture of mutual respect. Thank you Maria!"

Machado described her meeting with Trump as "excellent" and stated the gift was in recognition of his commitment to the freedom of the Venezuelan people.

A High-Stakes Diplomatic Play

Machado's gift comes after Trump previously dismissed the idea of installing her as Venezuela's new leader following the ouster of Nicolas Maduro. Trump had openly campaigned for the Nobel Peace Prize himself and expressed frustration when he was not selected last month.

While Machado handed over the physical gold medal, the Norwegian Nobel Institute has clarified that the honor itself is non-transferable and remains with her. When asked by Reuters on Wednesday if he wanted the prize, Trump said, "No, I didn't say that. She won the Nobel Peace Prize."

The lunch meeting, which lasted just over an hour, was the first time the two had met in person.

A Divided Washington

While Machado met with the president, the White House maintained a cautious stance. Press Secretary Karoline Leavitt said Trump stood by his "realistic" assessment that Machado currently lacks the necessary support to lead Venezuela in the short term.

After her White House visit, Machado headed to Capitol Hill, where she found a more receptive audience among a bipartisan group of more than a dozen senators.

Democratic Senator Chris Murphy of Connecticut said Machado reported that repression in Venezuela has not eased. He noted that interim President Delcy Rodriguez, whom he called a "smooth operator," is becoming more entrenched daily with what he described as Trump's support. "I hope elections happen, but I'm skeptical," Murphy added.

Machado, who fled Venezuela in a dramatic seaborne escape in December, is now vying for Washington's backing against members of Venezuela's current government.

Trump's Focus on Oil and Stability

President Trump has made his priorities for Venezuela clear: securing U.S. access to the country's vast oil reserves and overseeing its economic reconstruction. He has spoken favorably of interim President Delcy Rodriguez, Maduro's former second-in-command who assumed leadership after U.S. forces captured Maduro in a "snatch-and-grab operation" this month.

"She's been very good to deal with," Trump said of Rodriguez in a Reuters interview on Wednesday.

Meanwhile, Rodriguez is also making diplomatic moves. In a recent address to lawmakers, she called for diplomacy with the U.S. and announced plans to reform Venezuela's oil industry to attract foreign investors.

The political situation remains tense. Machado was barred from running in the 2024 presidential election by a court loyal to Maduro. Many outside observers believe the opposition candidate she backed, Edmundo Gonzalez, won by a significant margin, but Maduro claimed victory. While the new government has released dozens of political prisoners, human rights groups argue the numbers have been exaggerated.

Despite rising tensions and threats of US military action against Iran, a global oversupply of crude oil is expected to cushion the market from any major price shocks. Analysts suggest that while a knee-jerk price spike is possible, the market's underlying fundamentals point to a subdued, longer-term impact.

Fundamentals Trump Short-Term Sentiment

Manpreet Gill, chief investment officer at Standard Chartered, argues that the current market dynamics can separate short-term, sentiment-driven moves from the reality of supply and demand. He points to a similar scenario during the 12-day Iran-Israel war last June, where an initial price rise was followed by a return to previous levels.

"We don't have to go back that far in history... we had a spike in the regional tensions last year when oil prices did rise, but took a full circle," Gill noted.

He explained that the market is so heavily skewed toward excess supply that a significant volume of global crude would need to be taken offline to trigger a lasting price increase. Even the disruption to Moscow's energy exports during the Russia-Ukraine war "didn't have a lasting impact on oil prices" due to the overwhelming supply glut.

Recent Price Action Reflects Market Calm

Recent market behavior supports this outlook. Oil prices fell more than 4% on Thursday after US President Donald Trump signaled he would hold off on attacking Iran.

• Brent crude, the global benchmark, was trading 4.15% lower at $63.76 a barrel.

• West Texas Intermediate (WTI), the US benchmark, dropped 4.29% to $59.36 a barrel.

Over the past week, Trump had repeatedly threatened Iran's leadership following the killing of protesters demonstrating against the nation's deteriorating economy. "The killing in Iran is stopping, and there's no plan for executions," Trump said Wednesday from the Oval Office, adding, "I'm sure if it happens, I'll be very upset."

The Inflation Factor in US Policy

Analysts believe that regardless of public rhetoric, a key priority for the US is preventing a surge in consumer prices, which serves as a practical constraint on its foreign policy.

"Avoiding the inflation surge ended up being a bigger priority," said Gill, drawing a parallel to US trade policy.

Christian Nolting, chief investment officer at Deutsche Bank, echoed this sentiment, emphasizing that oil price movements are critical for investors to monitor. "What's the development there because that feeds into global inflation," he said. "If we were to get very much higher oil prices... that is probably then a game changer for central banks as they could not cut [interest rates] as much as they like."

US-China Tariffs an Ongoing Issue

Trump has also threatened a 25% tariff on Iran's global trade partners, a move that could affect China, its largest partner. However, Nolting views this not as a new crisis but as a continuation of existing trade friction.

"We always said that tariffs is a discussion that will not go away as there's not a 100 per cent agreement between US and China. There's just a pause at the moment," he stated. Nolting suggested a balance of power exists, with US leadership in AI investment and China's control over rare earths creating mutual dependence that will likely lead to continued, albeit tough, discussions.

Venezuela's Impact Is Years Away

The global energy landscape was also recently stirred by the US capture of Venezuelan leader Nicolas Maduro. While the US aims to develop the South American nation's vast oil reserves, both Nolting and Gill agree that this will not alter market dynamics in the short term.

Nolting pointed out that the market reaction was minimal because rebuilding Venezuela's ailing oil infrastructure to boost production will take a long time. "You could say, it is downside for the oil prices if there's much more production coming from Venezuela," he said. "But I think that's not going to be done in a month, not in a year."

Gill concurred, placing any significant change to Venezuela's production capacity on a three-to-five-year timeline. For the immediate 2026 outlook, he concluded, "it's hard to see how anything changes."