FX & Global Competitiveness

The broad dollar — its direction and its valuation. A strong dollar is a headwind for US multinational earnings and emerging markets; a weak dollar is a tailwind. The pills read the broad-dollar year-on-year move.

TailwindYoY < −8%

Neutral±8%

HeadwindYoY > +8%

▸ Regime definitions & method

Tailwind broad dollar YoY < −8% — a falling dollar lifts the value of foreign earnings and eases global financial conditions.

Neutral ±8% — no clear FX impulse on earnings.

Headwind YoY > +8% — a rising dollar erodes foreign earnings and tightens conditions for dollar borrowers abroad.

Broad trade-weighted dollar = DTWEXBGS, split into advanced (AFE) and emerging (EME). Valuation uses the BIS real effective exchange rate (RBUSBIS) versus its 10-year average.

Current readings

Broad Dollar YoY

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DTWEXBGS, %

REER vs 10y Avg

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RBUSBIS, %

Dollar z-score

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10y, std devs

Components · inputs

Broad Dollar Index — Level

The trade-weighted dollar. Higher = stronger dollar, a drag on foreign earnings.

Real Effective Exchange Rate

Inflation-adjusted dollar (BIS REER). The dashed line is the 10-year average; well above it is an expensive, mean-reverting dollar.

Synthesis · the dollar impulse

Broad Dollar — Year-over-Year

The FX impulse on earnings. Dashed ±8% lines mark the strong / weak thresholds; sustained moves above +8% (shaded) are an earnings headwind.

The dollar against its major trading partners — euro, pound, yen, yuan, peso and loonie. All pairs are oriented to USD strength (up = dollar stronger). The pills read how broad that strength is.

Broadly weaker≤ 2 of 6 up

Mixed3 of 6

Broadly stronger≥ 4 of 6 up

▸ Regime definitions & method

Each pair is normalized to USD strength (FRED quotes EUR and GBP as USD-per-unit, the rest as units-per-USD). Up = the dollar bought more of that currency over the year.

Broadly stronger the dollar rose against ≥ 4 of 6 — a broad earnings headwind · Mixed 3 of 6 · Broadly weaker ≤ 2 of 6.

Current readings · USD strength YoY

USD vs Euro

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EUR

USD vs Yen

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JPY

USD vs Yuan

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CNY

Components · USD-strength index (2015 = 100)

Developed-Market Pairs

USD strength vs euro, pound and yen, indexed to 100. Rising = dollar stronger.

Emerging-Market Pairs

USD strength vs yuan, peso and Canadian dollar, indexed to 100.

Synthesis · USD strength by currency

USD Strength vs Each Currency — YoY

Red = dollar stronger over the year (headwind); green = dollar weaker (tailwind). Ranked strongest to weakest.

The external competitiveness check — the trade balance and whether exports are outgrowing imports. The pills read the export-minus-import growth divergence.

Deterioratingdiv < −2pp

Balanced−2 to +2pp

Improvingdiv > +2pp

▸ Regime definitions & method

Improving exports YoY − imports YoY > +2pp — exports outpacing imports; external demand and competitiveness strengthening.

Balanced ±2pp — flows growing together.

Deteriorating < −2pp — imports outrunning exports; the trade drag is widening.

Trade balance (BOPGSTB) is goods & services; exports (BOPTEXP) and imports (BOPTIMP) are tracked year-on-year. A weaker dollar typically improves the divergence with a lag.

Current readings

Trade Balance

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BOPGSTB, $bn/mo

Exports YoY

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BOPTEXP, %

Imports YoY

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BOPTIMP, %

Components · inputs

Trade Balance — Level

Goods & services balance. Below zero is a deficit; a widening (more negative) trend is a growth drag.

Exports vs Imports — Level

The two flows. When exports (solid) grow faster than imports (dashed), the balance improves.

Synthesis · export − import growth

Export − Import Growth Divergence

Exports YoY minus imports YoY. Above zero (the competitiveness line), exports are winning; the ±2pp bands mark the regime boundaries.

Which sectors the dollar helps or hurts — sector foreign-revenue exposure crossed with the current dollar move. The pills read the dollar's direction, which sets the sign of the impact.

Tailwind to exportersweak USD

Neutral±8%

Headwind to exportersstrong USD

▸ Regime definitions & method

High-foreign-revenue sectors (Tech, Materials, Comm Services) earn a large share abroad, so a strong dollar shrinks their reported earnings and a weak dollar inflates them. Domestic sectors (Utilities, Real Estate, Financials) are largely insulated.

FX earnings impact = foreign-revenue weight × (− broad-dollar YoY). Positive = tailwind, negative = headwind. With the dollar near flat, current impacts are muted.

Current readings

High-Exposure Sectors

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foreign rev > 40%

Most Exposed

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Least Exposed

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Components · inputs

Foreign-Revenue Weight by Sector

Structural exposure — the share of revenue earned abroad. Higher = more dollar-sensitive.

Dollar Sensitivity by Sector

The model's FX sensitivity score per sector — how much a dollar move flows through to earnings.

Synthesis · current FX earnings impact

FX Earnings Impact by Sector (current dollar)

Foreign-revenue weight × the current dollar move. Green = tailwind (weak dollar helps); red = headwind (strong dollar hurts). Ranked best to worst.