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Market Commentary | The week that was

Business leaders lend a helping hand: South African business leaders are teaming up with the government to tackle the energy crisis, transport issues, and rising crime and corruption. The persistent Eskom blackouts have forced businesses to spend billions on diesel generators instead of investing in growth and jobs. Concerns over the country's position on the Russia-Ukraine war have also contributed to economic instability. Through collaborative efforts, business leaders and the government aim to restore confidence and implement targeted solutions. The partnership involves specific goals, set timelines, and transparent progress updates. Business leaders have pledged substantial funding to support the initiatives and ensure public communication.

OECD urges Reserve Bank to stay the course in reining in inflation: The Organisation for Economic Co-operation and Development (OECD) has urged the South African Reserve Bank to tackle inflation amidst power cuts that could raise consumer prices. The current inflation rate of 6.8% is predicted to remain above the target range of 3%-6% in 2023 but is expected to fall within the target range in 2024. The organization recommends expanding the income tax base and increasing property and environmental taxes to counter declining revenues caused by falling commodity prices and slower growth. It emphasizes the importance of private investment, particularly in power generation, as the primary driver of future growth. The OECD also highlights the weakening rand and the need to address the electricity sector bottlenecks, suggesting a reduction in regulatory burdens to encourage competition, boost private investment, enhance infrastructure, and lower consumer prices.

This week holds significant market events. Key highlights include the release of the US Consumer Price Index (CPI) data and the Federal Open Market Committee (FOMC) rate decision Wednesday. The European Central Bank (ECB) expects to raise rates by another 25 basis points on Thursday, while the Bank of Japan anticipates maintaining rates unchanged on Friday. Analysts speculate potential interest rate cuts by the Chinese central bank as Chinese authorities seek to stimulate their underperforming economy.

Markets: The Rand continued its winning streak for the seventh consecutive day, displaying strength against major currencies and closing at R18.70 on Friday. The positive performance is due to increased foreign inflows into local assets, which boosted overall optimism. However, as important US data and the FOMC decision approach, the Rand may undergo a period of consolidation. Monday (12 June), the Rand was trading at R18.73/$, R20.13/€, and R23.56/£.

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