Post on 06 October 2022

European companies benefit from the fall of the euro

European exporting companies feared that they would never get out of the strong euro, which was penalising their competitiveness. For 2022, they were still including a euro between $1.15 and $1.20 in their budgets and hedging strategies. Expectations consistent with those of market strategists. In January, they forecast the euro at $1.14 nine months later. The most pessimistic forecast was for the euro at $1.06, according to the Bloomberg consensus. It stands at $0.9920 on 5 October, having fallen to an annual low of $0.9594 in 2022.

This year, companies found themselves “overprotected” against a rise in the euro that never happened. During the year, they tried to “lock in” a more favourable exchange rate for their business. The aim is to profit as long as possible from a weakening of the euro that will not be “eternal”. “European groups almost systematically hedge their cash flows in foreign currencies, less so for their investments abroad. Currency risk rules are decided at senior management level and generally evolve slowly,” explains Jean-Philippe Castellani, head of currency risk management at Deutsche Bank for France, Belgium and Southern Europe.

Source : Les Echos

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