CPI – Forex News Indicators
Posted in Analysis by Lewis Wolfe
Thursday, February 19th, 2009 10:47 AM GMT
A consumer price index (CPI) is a measure of the average prices of consumer goods and services – basically it’s the “inflation rate”. It’s one of the most important indicators of confidence in, and the strength of, a national economy.
In the different currency zones, governments or (semi)independent organizations publish CPI figures on a monthly and yearly basis – in the US, it’s the Department of Labor, while in the UK, it’s the Office for National Statistics – where it’s called the Retail Prices Index (RPI).
Remember that it’s domestic statistics, for a “typical urban consumer”, whatever that is – the price of food in supermarkets, the average family shopping basket, not industrial costs.
Underlying CPI
Also sometimes known as the core CPI – meaning the index for all items except those classified as food or energy. These tend to be more volatile than others, subject to more significant rises and falls and also seasonal variations. Consequently the underlying CPI will usually be a better index by which to keep track of longer-term trends. Cars, airfares, clothing & apparel can also be relatively volatile items within the underlying CPI.
Forex News CPI
For example – CPI figures for Sweden are coming out tomorrow, and we’re in a phase of generally decreasing inflation, ie deflation, so CPI m/m is forecast to be -0.7%, compared with the previous month’s figure of -1.3%. If the actual figure is different from the forecast, expect movement in the Swedish krona, for example, in the currency pair SEK/EUR.
Remember, it’s a measure of the underlying strength of a national economy and the difference between expected and actual is where the trading takes place – if you’re new to forex trading, look out for sudden movements in currency prices shortly before, and definitely after, CPI news announcements.
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[...] – basically it’s the “inflation rate”. It’s one of the most important indicators of confidence in, and the strength of, a national economy. [...]
[...] Original post by ForexPerform [...]