Exchange rate, interest rate and commodity price trends


The global economy lost a little of its momentum in 2016. Energy and commodity prices recovered as the reporting period went on, albeit at a relatively low level. Confidence in the economic stability of crisis-hit emerging markets partially returned and led to a gradual appreciation of the currencies of these countries. The euro lost ground slightly against the US dollar, but gained ground slightly against the Chinese renminbi. In the wake of the United Kingdom’s Brexit referendum in June 2016, the sterling slumped against the European single currency. The Russian ruble and the Brazilian real turned around their preceding downtrend at the beginning of the reporting period and have since recorded significant price gains. For 2017, we are forecasting that the euro will gain some strength against the US dollar, Chinese renminbi, sterling and other key currencies. The expectation is that the Russian ruble and Brazilian real will remain relatively weak. We currently assume that these trends will continue in the period 2018 to 2021. There is still a general event risk – defined as the risk arising from unforeseen market developments.


Interest rates remained extremely low in fiscal year 2016 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 consider it unlikely that interest rates will rise in 2017. In the USA, however, we can expect to see a moderate increase in interest rates. For the period 2018 to 2021, we anticipate a successive 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 and rare earths, to move sideways or upwards in 2016 amid high volatility in some cases. In light of these individual factors, we expect mixed developments in the commodity markets in 2017 with an increase in most commodity prices. We believe that this trend will continue in the period 2018 to 2021. Forward-looking, system-based and individual procurement methods enable us to mitigate 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.