Exchange rate, interest rate and commodity price trends


The global economy grew at an increased pace in 2017. Average energy and commodity prices were up year-on-year but remained at a relatively low level. The euro appreciated against the US dollar over the course of the year. Sterling lost further value against the European single currency due to uncertainty surrounding the exit negotiations began between the United Kingdom and the EU and the shape of future relations. The currencies of major emerging markets lost some further ground against the euro from the start of the reporting period. For 2018, we are forecasting that the euro will remain stable against the US dollar, sterling, Chinese renminbi and other key currencies. The expectation is that the Russian ruble, Brazilian real and Indian rupee will remain relatively weak. We currently assume that these trends will continue in the period 2019 to 2022. There is still a general event risk – defined as the risk arising from unforeseen market developments.


Interest rates remained extremely low in fiscal year 2017 due to the continuation of expansionary monetary policy and the challenging overall economic environment. In the major Western industrialized nations, key interest rates persisted at a historic low level. While it became apparent in the USA that the extremely loose monetary policy was gradually drawing to an end, the European Central Bank continued to pursue this course. In light of further expansionary monetary policy measures in the eurozone, we therefore expect no more than a slight rise in interest rates in 2018. In the USA, however, we can expect to see a moderate increase in interest rates. For the period 2019 to 2022, we anticipate a gradual rise in interest rates, though the pace will vary from region to region.


Political and economic uncertainty in different forms caused the prices for many raw and input materials, such as crude oil, steel, cobalt and rare earths, to move sideways or upwards in 2017, amid high volatility in some cases. In light of these individual factors, we expect mixed developments in the commodity markets in 2018 with an increase in most commodity prices. We anticipate continued volatility in the commodity markets for the period from 2019 to 2022. Forward-looking, system-based and individual procurement methods enable us to limit risks arising from this volatility in commodity prices. Long-term supply agreements ensure that the Group’s needs are satisfied and thus ensure a high degree of supply reliability.