A rise in the value of the euro against the U.S. dollar in 2025 could reduce European corporate earnings by around 2%, according to analysts at Citi.
So far this year, the euro has gained about 10% against the U.S. dollar. This increase is partly driven by investors shifting their focus from the U.S. to European assets, attracted by relatively stronger economic prospects in Europe and growing policy uncertainty in the U.S.
Citi analysts predict that the euro could strengthen further, reaching $1.20 in the next six to twelve months, a 5% increase from current levels.
European companies, many of which rely heavily on exports, could see earnings pressure from the stronger euro. Analysts, led by Beata Manthey, warned that currency fluctuations, along with the ongoing uncertainty around U.S. tariffs under President Donald Trump, could impact earnings, especially in sectors like materials and energy.
However, Citi’s analysts pointed out that past euro rallies have often been balanced out by other factors, such as favorable economic conditions. They noted that earnings per share (EPS) for European companies typically grows by around 10% on average within a year of a significant euro rally, despite varying outcomes.
Citi also highlighted some companies that could benefit from the stronger euro. These include banks like Commerzbank and PKO Bank, and retailers like Zalando and Redcare Pharmacy. On the other hand, firms that may face challenges from a stronger euro include materials company UPM-Kymmene, oil giants Shell and BP, and drugmakers like Novo Nordisk and AstraZeneca.
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