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How Currency Shifts Boosted Q2 Portfolio Returns

Aug 11, 2025 | Advice, Ben Eccles, Investments, Markets

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Ben Eccles

Independent Financial Adviser

If your portfolio soared in U.S. markets during Q2 but looked flat in euros or pounds, you’re not imagining things. Currency moves played a bigger role than many investors realise.

In dollar terms, the numbers looked fantastic:

  • S&P 500: +10.45% in USD
  • MSCI World: +10.87% in USD

But translate those returns into euros or pounds, and the story changes:

  • S&P 500: just +1.72% in EUR and +4.17% in GBP
  • MSCI World: only +2.11% in EUR and +4.57% in GBP

That’s a big gap, and it comes down to how currencies moved.

Why the Disconnect Happened

In Q2, the U.S. dollar weakened. That was good news for U.S.‑based investors because their gains weren’t reduced by FX headwinds. But for investors measuring returns in euros or pounds, it was a different story.

Here’s why:

  • FX drag hides progress: When the euro or pound strengthens against the dollar, every U.S. dollar of return converts into fewer euros or pounds.
  • Central bank divergence: The market expected U.S. rate cuts, while the European Central Bank and Bank of England stayed relatively firm. This supported EUR and GBP, putting pressure on USD.
  • Currency exposure matters: Investors who hedged their portfolios—or actively managed their currency exposure—likely saw results closer to those headline USD returns.

The Numbers in Context

Take a look at how this played out in Q2:

  • S&P 500: +10.45% in USD → +1.72% in EUR
  • MSCI World: +10.87% in USD → +2.11% in EUR

That difference isn’t small; it’s the kind of gap that can make a strong quarter feel underwhelming.

What This Means for the Rest of the Year

Where currencies go next could shift the picture again:

  • If the dollar weakens further, U.S. investors could see even bigger tailwinds, while euro and pound investors may continue to feel the drag.
  • If the euro or pound softens, that gap would narrow, making international returns look stronger in local terms.
  • Hedging with purpose, currency hedging isn’t a one‑size‑fits‑all solution. It works best when it’s part of a broader strategy, not a short‑term reaction.

Bottom Line

Currency isn’t just background noise; it’s a key part of your real returns. Q2 showed just how much FX can amplify or erode performance, depending on where you sit.

At SJB Global, we help you cut through the noise. Whether you think in dollars, euros, or pounds, our goal is to make sure currency moves don’t catch you off guard.

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This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

 

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