Exchange rate, interest rate and commodity price trends


The global economy lost some of its momentum in 2013. The US Federal Reserve’s announcement of its plan to trim its bond-buying program in the near future led to an increased outflow of capital, primarily in countries with high-yielding currencies. This in turn substantially impacted exchange rates, leading to considerable volatility. The euro gained against the US dollar in the first four weeks of 2013 before weakening once more up to July. It then trended upwards again for the remainder of the year. For 2014, we expect euro exchange rates against the US dollar, sterling, Chinese renminbi and other key currencies to be relatively stable, despite continuing high volatility in the financial markets. However, there is still an event risk – defined as the risk arising from unforeseen market developments. We currently assume that this trend will continue in the period 2015 to 2018.


Interest rates remained extremely low in fiscal 2013 due to the ongoing expansionary monetary policy and the difficult overall economic environment. A number of countries actually cut their interest rates further in the course of the year. In 2014, we consider it unlikely that either Europe or the USA will adopt a more restrictive monetary policy, and hence increase interest rates. We are predicting that short- and long-term interest rates will only rise significantly if there is a sharp increase in inflation. For the period 2015 to 2018, we are predicting a gradual rise in interest rates.


Commodity prices fell in 2013. After peaks were recorded in the first quarter, prices tailed off as the year went on, principally due to the weaker economic signals from China and to supply overcharges. Assuming that the global economy continues to grow, we expect prices of most exchange-traded raw materials in 2014 to fluctuate around the current level. Provided there is a further recovery of the global economy, we believe that commodity prices will rise in the period 2015 to 2018.