Trump Effect?

Strong Euro Imperils German Profits

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The strong euro - a curse for many, a blessing for few. Picture source: DPA

At the start of the year, US President Donald Trump bemoaned the high value of the dollar against the euro and hinted at possible punitive measures against German industry.  Without even taking any official action, Mr. Trump has gotten his wish: the euro has risen sharply, hurting German exporters and helping their American competitors.

When the US president flashed his anger at the start of the year, the euro was trading at $1.04. It has now climbed to $1.18, a rise of nearly 13 percent and currency analysts believe it could rise to $1.28 by next summer.

The German export industry, the backbone of the country’s economy, stands to suffer the most in the euro’s rise, which has been caused by a confluence of factors: chaos in the US administration and a dovish monetary policy from the European Central Bank.

“Growth in the euro zone has surprised on the upside this year.”

Jane Foley, Currency Analyst, RaboBank

“Growth in the euro zone has surprised on the upside this year,” said Jane Foley, currency analyst at Rabobank in London. “This factor combined with the Macron victory in the French presidential election has triggered a rotation back into euro-denominated assets.”

Looking at winners and losers in this shift, German exporters stand to be among the biggest losers. When dollar-denominated sales in places like the United States and Asia are translated into euros back in Germany, companies earn less profits.

This is particularly true for firms in the industrial and chemical sector, says Benjamin Gartner, share analyst at fund manager Union Investment. Commerzbank analyst Markus Wallner says these include companies like agrochemical producer Bayer, pharmaceutical company Merck and semiconductor firm Infineon.

Also being hit, Mr. Wallner says, are exporters like Siemens, the giant electrical equipment company, and BMW, the car manufacturer, whose revenues are largely in dollars in its biggest market, the United States. If the euro continues to rise, carmakers may be forced to raise their dollar prices in overseas markets, hurting competition with other brands.

But there are also some winners among German firms as well. These are mainly companies that produce their wares in areas where the dollar is dominant, such as Asia ,and sell the products in Europe. With lower costs, but steady revenues, their profits rise.

“There are few companies that profit from the higher euro,” said Christian von Engelbrechten, fund manager at Fidelity International. These include sporting goods companies Adidas and Puma, whose products are mainly made in Chinese and other Asian factories and sell to European consumers.

Another beneficiary of the strong euro is Lufthansa, which buys fuel in dollars but charges airfares mainly based on euro prices. Another company doing well is German TV broadcaster ProSieben, which buys US detective shows in dollars but earns advertising revenue in euros.

Analysts said some companies, like aircraft engine producer MTU Aero Engines,  successfully put in place currency hedges, so their profits should not be greatly affected by the currency turnabout.

As for President Trump, Commerzbank currency analyst Ulrich Hölmann says that he may be unintentionally causing the dollar to fall. “As much as Trump’s election victory helped the dollar last November and December, the US president and the Republican Congress majority are now a burden for the currency,” he said.


Robert Landgraf and Anke Rezmer reported this story for Handelsblatt. Charles Wallace adapted this story to English for Handelsblatt Global. To contact the authors:,

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