The adverse impact of the U.S. dollar's weakness is poised to emerge in European corporate earnings reports, positioning currency volatility as this season's defining theme. Since early 2025, the euro has surged nearly 13% against the dollar, while sterling gained approximately 8%. The Bloomberg Dollar Index hovers near three-year lows after sliding 9% from its January peak. For major European firms deriving over a quarter of revenue from North America, this currency shock could prove significant. Companies lacking robust hedging programs against unpredictable trade policy shifts under the Trump administration face particular vulnerability. Citigroup analysis indicates every 10% rise in the euro-dollar spot rate potentially reduces European corporate earnings by around 2%. Comparatively, U.S., Canadian, Chinese, and broader emerging market indices show greater resilience, with 72% to 85% of business concentrated domestically versus just 40% for the Stoxx Europe 600 index.

"Trump's fiscal and trade agenda has hammered the dollar this year," noted Susana Cruz, Panmure Liberum strategist. "The brunt falls on U.S. manufacturers reliant on imported raw materials, exporters to America—especially finished goods facing tariffs—and foreign investors holding dollar-denominated assets." Cruz identified healthcare, consumer services/products, luxury goods, and software as the most exposed sectors, while financial services, real estate, and insurance remain relatively insulated due to limited dollar sensitivity. Export-heavy industries like healthcare, luxury, and tech already feel pressure. German chemical distributor Brenntag SE lowered its full-year outlook Monday, citing adverse euro-dollar moves since Q2; North America contributes 32% of its revenue.

Analysts broadly slash forecasts, now anticipating declining European corporate profits. While this lowers the bar for meeting expectations, prolonged negative trends could trigger further downgrades. Though euro strength historically buoyed European equities, this correlation has recently weakened—signaling investor recognition of tightening profit margins despite encouraging European economic signals. Andreas Bruck and his Bank of America team warned recent euro appreciation may push this quarter's earnings beat ratio down to 50%, below the 53% long-term average. Sell-side analysts project Stoxx 600 EPS falling 3% year-on-year, the steepest drop in five quarters, driven by demand weakness hurting sales and a 3.5% YoY rise in the euro's trade-weighted index.

Despite recent dollar stabilization, major institutions foresee continued weakness. Goldman Sachs' Peter Oppenheimer team predicts persistent dollar depreciation will remain a headwind for European earnings. Goldman’s basket of European stocks with high dollar revenue exposure has underperformed the Stoxx Europe 600 by roughly 9 percentage points this year, featuring constituents like Deutsche Telekom, Roche Holding, BP, British American Tobacco, and EssilorLuxottica.

Corporate impact severity hinges on hedging sophistication. Luxury stocks, though universally exposed to dollar risk, show uneven profit effects. Brunello Cucinelli SpA's Friday results drew positive market response, delivering double-digit growth across regions unaffected by currency moves. The chairman stated during the earnings call that the firm consistently sets exchange rate expectations before launching product lines. "Companies with advanced hedging programs tend to outperform," emphasized Morgan Stanley strategist Marina Zavolok. Her team found 38% of MSCI Europe constituents deploy such measures, with software, aerospace, autos, and luxury sectors demonstrating the most refined FX hedging strategies.