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Strong Dollar To Remain A Drag On US Earnings Outlook


While the US economy is relatively insulated as a whole from the impact of a stronger dollar, currency strength is having a significant impact on corporate earnings. See our note earlier today on US firms flagging USD impact on Q3 earnings (including consumer products giants P&G and J&J today).

  • An estimated 30% of S&P 500 revenue is generated from abroad, and that is impacted negatively by dollar strength via the lower USD value of foreign currency-denominated profits, as well as through weaker exports.
  • The accompanying chart shows the net % of companies issuing net upward or downward revisions to their earnings guidance, plotted against the US dollar's strength.
  • Dollar weakness has at times been a tailwind to US corporates, but looks to be a headwind for the foreseeable future.

Source: Fed, BBG, MNI

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