Dollar's climb to affect corporate results ..... and Fed policy too ?

Monday 20th April 2015

 Dollar's climb to affect corporate results ..... and Fed policy too ?

"From PCs to burgers --- surging dollar takes bite out of US blue chip earnings" , The Financial Times, p.17

More than a fifth of the S&P 500 companies are due to announce their quarterly results this week, including a number of the blue-chip heavyweights, and analysts expect earnings numbers to have to have suffered from the inexorable rise of the dollar. If so, this would mirror a trend already set by GE and Philip Morris. The US currency rose 9% in the first quarter, and 15% in little more than 4 1/2 months. This obviously bad news for exports and exporters, but must also be preying on the minds of Fed policy makers as they deliberate the timing of interest rate hikes.

Although weaker than expected Q1 data has prompted some forecasters to put back their estimate of the timing of a Fed move (until early next year, in some cases), no one is in any doubt that it's coming. Expectations of higher US rates is not the only reason behind the strength of the dollar but it's a pretty fundamental one, and the issue has become a big complication for the Fed's decision-making process.