“This article in the FT shows that multinationals, including some "autonomies" such as McDonalds and Kraft, are making losses due to the weak Euro that partly offset their gains in Asia.”

Eoin Treacy's view
My comment – Thank you for this relevant email which may be of interest to other subscribers. I agree, currency movements are important and can either be a headwind or tailwind for earnings. However, they are by no means the only arbiter of a share's performance.

The Euro/Dollar rate has been as high as $1.50 this year but is currently at the same level it was in January; around $1.30. The Dollar's recent strength is probably going to have an impact on fourth quarter earnings.

Most Autonomies are dominant in their respective niches. Multinational companies are less likely to be affected by currency changes because they have diversified cash flows and the ability to hedge.

An additional factor is that if the US Dollar rallies on a sustained basis, assets denominated in US Dollars will be viewed as more desirable by foreign investors, particularly if the rally is accompanied by a process of multiple expansion.

Regardless of arguments for and against, we will be guided by the price action. Provided leading shares continue to trade to the left of their respective 200-day MAs, they can continue to be given the benefit of the doubt.