ECB Easing Could Strengthen Headwinds For U.S. Firms

With the European Central Bank set to meet on Thursday, most are expecting the bank to roll out a large scale quantitative easing program in an effort to boost the region’s failing economy.

This week, French President Francois Hollande commented that he saw the bank announcing its plans to buy foreign bonds on Thursday while other central banks like the Swiss National Bank and Danmarks Nationalbank took precautions to prepare for an ECB move.

ECB Moves Priced In

Since the ECB has been discussing the possibility of a rate cut for months, most analysts say that the decision to buy government bonds is mostly priced in already.

However, if the bank underwhelms by buying less than expected or holding off on purchases, it could roil European markets. 

ECB Easing Rocks The Boat In The U.S.

Although U.S. lawmakers are supportive of a quantitative easing program in Europe, many American corporations are bracing for a strong headwind as the U.S. dollar will continue to rise.

The already strong dollar has made it difficult for companies that make a significant amount of their profit outside the U.S. to attract customers and opened a door for foreign competitors to undercut U.S. firms.

Related Link: U.S. Internet Companies Could Face Pushback In Europe

Travel website Expedia Inc. EXPE said it has seen a marked decline in traffic from foreigners, a problem that hotel chains will also struggle with. Procter & Gamble PG, which does 65 percent of its sales outside the U.S., is struggling to compete with foreign firms that are able to offer customers significantly lower prices.

Similarly, Johnson & Johnson JNJ announced on Tuesday that if the dollar’s strength persists, the company will see far more damage to its earnings than it had originally forecast.