Exchange rate, interest rate and commodity price trends


The global economy continued its robust growth in 2018 with declining momentum. Average prices for energy and other commodities were up year-on-year but remained at a relatively low level. As the year went on, the euro lost ground against the US dollar. By contrast, the euro/sterling exchange rate remained virtually unchanged in spite of the uncertainty surrounding the outcome of the Brexit negotiations and the question of what form the relationship between the United Kingdom and the EU will take in the future. The currencies of major emerging markets lost further ground against the euro in the reporting period. For 2019, we are forecasting that the euro will strengthen against the US dollar, sterling and the Chinese renminbi. The expectation is that the Russian ruble, Brazilian real and Indian rupee will remain relatively weak. For 2020 to 2023, we currently expect that the euro will then be stable against the key currencies, but that the comparative weakness of the currencies in the above-mentioned emerging markets will probably continue. However, there is still a general event risk – defined as the risk arising from unforeseen market developments.


Interest rates remained low with a few exceptions in fiscal year 2018 due to the continuation of the prevailing expansionary monetary policy worldwide and the challenging overall economic environment. In the major Western industrialized nations, key interest rates persisted at a historic low level on the whole. 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 2019. In the United States of America, it is possible that the key interest rate will be raised again, depending on the future development of the economy. For the years 2020 to 2023, we anticipate a rise in interest rates, though the pace will vary from region to region.


Geopolitical and economic uncertainty in different forms caused the prices for many raw and input materials to vary in 2018. For example, average prices for raw materials such as iron ore, rare earths, natural rubber and lead fell, while prices for coking coal, crude oil, aluminium, copper and the precious metals palladium and rhodium, among others, rose. For the raw materials lithium and cobalt, which are relevant for e-mobility and also saw higher year-on-year average price levels, market prices eased in the course of the year. Based on analyses of factors of influence and trends in the commodity markets, we expect the prices of most commodities to rise in 2019. For the years 2020 to 2023, we continue to expect volatility in the commodity markets with prices trending upwards. We preventively analyze and limit these risks using system-based procurement methods. Long-term, stable supply agreements ensure that the Group’s needs are satisfied and guarantee a high degree of supply reliability.