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European corporations are sounding the alarm over the robust euro, as the only foreign money’s surge towards the greenback this yr opens up a brand new risk to exporters already contending with US President Donald Trump’s tariffs.
German software program group SAP, carmaker Porsche, brewer Heineken and French industrial big Schneider Electrical are among the many corporations to warn buyers of a possible hit after the euro climbed greater than 9 per cent to a three-year excessive.
The euro’s rally, which places it on observe for its greatest yr towards the greenback since 2017, undermines the competitiveness of European exporters to the US, the place there are already indicators that customers are reining in spending due to the uncertainty created by Trump’s commerce battle.
The US imposed so-called reciprocal tariffs on the EU of 20 per cent in early April however subsequently minimize them to 10 per cent to permit for 90 days of talks between the 2 sides.
“The strong euro is exacerbating the tariff shock,” stated Robin Winkler, chief economist for Germany at Deutsche Financial institution, including that it was “harming [companies’] competitiveness in foreign trade”.
HSBC analysts final week slashed their forecast for revenue progress this yr for corporations within the FTSE Europe index to 2.9 per cent, warning that the stronger euro may “significantly affect” their abroad earnings.
Though many corporations use foreign money hedges to guard towards swings in foreign-exchange charges, a number of have advised buyers {that a} extended rally within the euro would squeeze earnings and revenues. The euro’s good points may crush demand as items develop into costlier to US consumers, or imply earnings translated into residence currencies are lowered.
SAP chief monetary officer Dominik Asam stated that every $0.01 strengthening within the euro-dollar fee would shave €30mn from its full-year revenues.
He added that whereas SAP had hedged a good portion of its foreign money publicity this yr, “2026 is more difficult because then we would suffer really from the decline in the exchange rate” as soon as the hedges expire.
Heineken stated the surge within the euro towards a variety of currencies, together with the Mexican peso, may take €180mn off its full-year adjusted internet revenue.
Schneider Electrical chief monetary officer Hilary Maxson cautioned that the weaker greenback, alongside different foreign money results, would knock annual revenues on the maker {of electrical} tools by as a lot as €1.25bn.
Porsche had sought to minimise the impact of the stronger euro, chief monetary officer Jochen Breckner advised journalists, however he stated the group, which counts North America as its second-largest market, would really feel a “certain effect”.
Germany’s HelloFresh, a supplier of meal kits, warned that it had primarily based its outlook for the yr on a euro-dollar fee of $1.04, and a fee of $1.14 would hit adjusted working revenue by €28mn.
The euro’s resurgence marks a putting reversal from the ultimate quarter of final yr, when the greenback staged a blistering rally on expectations that Trump’s financial agenda would enhance US progress and harm America’s buying and selling companions.
As a substitute, indications that Trump’s aggressive commerce battle is having a chilling impact on the US financial system have hit the greenback and left the S&P 500 lagging behind European shares this yr.
In an indication of buyers’ twin concern over the euro and tariffs, shares of European exporters have underperformed the broader European market. A basket of shares, together with Stellantis, SAP and Daimler Truck, has underperformed because the euro has climbed, in line with Barclays.
Trevor Greetham, head of multi-asset investing at Royal London Asset Administration, stated a mix of the foreign money’s energy and Trump’s duties had prompted him to cut back publicity to European shares.
A number of main banks count on the euro to strengthen additional after it touched a greater than three-year excessive of $1.157 in April.
Athanasios Vamvakidis, Financial institution of America’s world head of G10 foreign money technique, stated the foreign money had additionally been boosted by the German authorities’s €1tn stimulus bundle.
“The market was too optimistic on the US and too pessimistic on Europe,” stated Vamvakidis, who predicts the euro will hit $1.17 by the tip of the yr.
Further reporting by Patricia Nilsson, Emily Herbert and Ian Johnston
