Carmakers to gain most from weak euro

On Wednesday, Moody’s said it had lowered its forecast for the euro-dollar exchange rate to 1.10 through 2015 and 1.13 in 2016, adding that it did not expect any major recovery in the single currency before 2017.

“In general, a weaker euro boosts the price competitiveness of euro area exports, which account for about 25 percent of Europe’s gross domestic product,” the ratings agency said in a research note.

“However, a lower euro exchange rate will raise import prices and increase the cost of inputs that are denominated in currencies other than the euro.”

Moody’s said the low euro would prove “mildly negative” for non-food retailers, while airlines would suffer the most.

“While demand for flights to Europe might increase, driven by the rising popularity of euro area destinations, most of this rising demand will be captured by non-European airlines,” it said.

“In addition, flying from Europe to other continents will become less attractive. Furthermore, the positive effect of falling oil prices will be partially offset by the weakening euro, as global oil prices are quoted in U.S. dollars making fuel purchases more expensive for European airlines.”

In a February research note, Goldman Sachs Asset Management said the weak euro could boost revenues for many of the region’s companies.

“With 54 percent of aggregate corporate revenues being generated outside of Europe, we look for a weakening euro to benefit the competitiveness and profitability of many European companies through a more competitive export business and higher profits when converting overseas profits back into the local euro currency,” the bank said.

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