Currency Headwinds Shift to Europe from North America: Kyriba
Posted by Colin Lambert. Last updated: February 19, 2024
Although FX markets remained within or close to recent ranges in Q3 2023, there was a change in the domicile of those corporations most impacted by currency movements, with European companies facing greater headwinds compared to the North American peers for the first time since 2021.
The latest Kyriba Currency Impact Report (CIR) analyses the earnings calls of 1,700 publicly traded North American and European companies as part of a continued effort to provide insight into how foreign exchange impacts the revenue, earnings and cash flow of global organizations. It finds that European companies faced $8.96 billion in currency headwinds in Q3, the highest it has been for more than a decade.
Also for the first time in several years, these headwinds were higher than those experienced by North American companies, who faced $7.05 billion in headwinds. The North American headwinds were less than half those in Q2 2023 and the lowest since Q4 2021. The overall currency impact on earnings, including tailwinds, across both regions, was $30 billion according to the report, and Kyriba says the actual headwinds are probably underestimated as “most companies with currency headwinds generally do not report them”.
The average EPS impact on North American companies was unchanged at $0.05.
“While the overall currency impact hasn’t greatly fluctuated since the previous quarter, market volatility continues to persist meaning that all global organisations must be on watch to ensure they understand the impact that currency can have on their bottom line,” observes Melissa Di Donato, chair and CEO at Kyriba. “With the looming prospect of interest rate reductions coming later this year, now is the time to be more diligent about managing FX risk.”
Andy Gage, senior vice president of FX solutions and advisory services, Kyriba, adds, “The USD staged a strong comeback in the quarter, but it was not enough to erase the headwinds that many UK and European based companies experienced. Given the stronger performance of the GBP and European currencies against the USD at the end of 2023, we expect the European currency headwinds to strengthen significantly, potentially setting European MNCs up for record currency headwinds in 2024.”