Strong dollar coincides with lower earnings expectations – Charles Schwab

FXStreet Insights Team FXStreet

The Federal Rserve has raised its benchmark lending rate by three percentage points so far this year. Higher interest rates lead to a stronger US dollar, which is likely to add to global economic pressure and weigh on corporate profits, economists at Charles Schwab report.

Companies could be looking at a difficult start to next year

“An excessively strong dollar can cause an earnings recession – especially when the macroeconomic backdrop is overshadowed by the Fed's aggressive tightening policy, pessimism among consumers and businesses, and a significant slowdown in leading economic indicators.”

“The strong dollar will probably hit earnings eventually. Foreign exchange difficulties often take a while to fully translate into weaker profits. That means companies could be looking at a difficult start to next year.”

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FXStreet Insights Team

FXStreet

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