Last Updated on August 5, 2025
The euro’s significant appreciation in 2025 is beginning to exert pressure on the earnings of European companies. As the second-quarter earnings season unfolds, analysts anticipate weaker profitability across several key sectors, driven by the dual challenges of a stronger currency and softening demand.
Recent analysis from Bank of America suggests that the combination of a strong euro and sluggish sales could weigh heavily on the STOXX 600 index, potentially resulting in its weakest quarterly performance in over a year.
Over the past quarter, the euro has strengthened by 9% against the U.S. dollar—reaching a four-year high and marking its strongest quarterly performance since late 2022. Against a broader basket of global currencies, as tracked by the European Central Bank, the euro rose 4.6%, hitting an all-time high on July 1.
Wall Street analysts currently forecast a 3% decline in earnings per share (EPS) for European companies in Q2 2025 compared to the same period last year. This anticipated drop, coupled with a corresponding 3% contraction in sales, reflects the combined impact of weakening global demand and unfavorable currency exchange dynamics.
Conclusion:
For European companies, the strengthening euro presents a challenging environment. A stronger currency makes exports less competitive and reduces the value of overseas revenues when converted back to euros. Coupled with declining sales due to softening demand, many firms are likely to face tighter margins and subdued earnings growth. Unless demand conditions improve or the euro’s rally stabilizes, the pressure on corporate profitability could persist through the second half of the year.
I invest from Europe in American ETFs, so I hope that the euro will stop rising that much because my portfolio is down because of this.