Data compiled by Bloomberg suggests that the U.S. dollar is set to fall against several major currencies, including the euro, the sterling, and the Swiss franc. This could be a potentially damaging blow to the European Stoxx 600 Index, which relies on the United States and Canada for approximately a third of its sales.
Bloomberg projected that the euro would reach $1.20 by the end of the year, with the sterling and the Swiss franc also expected to gain significant ground. In addition, Barclays revealed that 40% of companies now have a positive view on exchange rates, down from 60% in the third quarter of 2022.
“Economic strength has disguised the impact of currency appreciation,” Sharon Bell, senior European equity strategist at Goldman Sachs Group Inc. stated. “But it will be coming through, we expect to see more impact in the second and third quarter.”
According to Bloomberg, Europe’s consumer, healthcare, media, and telecommunications sectors receive the largest proportion of their revenues from the United States. While a weaker dollar can reduce import costs, these sectors’ services can also become more expensive in other countries, thereby impacting demand.