Currency Impact Fading
Arresting the surge in the U.S. dollar is a big part of ending the earnings recession. But while the improving year-over-year comparisons for the dollar set up a better earnings environment in the second half of the year, the mentions of foreign exchange on conference calls have not died down lately [Figure 3]. In fact, the number of mentions on second quarter earnings calls was greater than four of the previous five quarters; though currency did get 17% fewer mentions last quarter than in the third quarter of 2015 when the dollar’s year-over- year increase peaked.
Should the U.S. Dollar Index stay where it closed on August 26, 2016, for the rest of the year, the dollar would represent a tailwind in both the third and fourth quarters of 2016 thanks to respective year-over-year declines in the Dollar Index of 0.7% and 2.3%.
