{"id":9567,"date":"2021-08-25T14:54:53","date_gmt":"2021-08-25T11:54:53","guid":{"rendered":"https:\/\/roboforex.com/blog\/?p=9567"},"modified":"2023-10-11T11:05:14","modified_gmt":"2023-10-11T08:05:14","slug":"what-is-consumer-price-index-and-how-to-use-it-in-forex","status":"publish","type":"post","link":"https:\/\/roboforex.com/blog\/blog\/2021\/08\/25\/what-is-consumer-price-index-and-how-to-use-it-in-forex\/","title":{"rendered":"What Is Consumer Price Index (CPI) and How to Use It in Forex Trading?"},"content":{"rendered":"<!DOCTYPE html PUBLIC \"-\/\/W3C\/\/DTD HTML 4.0 Transitional\/\/EN\" \"http:\/\/www.w3.org\/TR\/REC-html40\/loose.dtd\">\n<html><body><p>This article is devoted to one more financial index that can influence the quotations of foreign currencies &mdash; the CPI (Consumer Price Index). In reflects Price changes for a group of socially important goods and services over the reporting period, which is usually a month. The CPI value is announced in the second half of the month following the reporting period.<\/p>\n\n\n\n<p>Like most statistical indicee, the CPI is calculater in percent. If the factual result is different to the forecast, it can influence the currency of the issuing country significantly.<\/p>\n\n\n\n<p>The CPI is calculated by special <a href=\"https:\/\/roboforex.com\/forex-trading\/assets\/indices\/\" data-internallinksmanager029f6b8e52c=\"11\" title=\"indices trading\">indices<\/a> and published on news portals and in the <a href=\"https:\/\/roboforex.com\/beginners\/analytics\/economic-calendar\/#:~:text=The%20Forex%20Economic%20calendar%20is%20an%20efficient%20tool%20that%20contains%20up%2Dto%2Ddate%20information%20about%20upcoming%20events%20in%20the%20financial%20industry.%20The%20data%20from%20the%20Economic%20news%20calendar%20helps%20traders%20to%20analyze%20the%20situation%20of%20Forex%20and%20make%20plans%20based%20on%20the%20information%20they%20get\" target=\"_blank\" rel=\"noreferrer noopener\">economic calendar<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_CPI_and_its_types\"><\/span>The CPI and its types<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The CPI is a complex phenomenon that is comprised of several indices:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Core CPI is the base CPI that does not include energy and foods.<\/li>\n\n\n\n<li>The CPI, n.s.a. does not account for seasonal Price fluctuations.<\/li>\n\n\n\n<li>The CPI, s.a. accounts for seasonal fluctuations of prices.<\/li>\n<\/ul>\n\n\n\n<p>The <a href=\"https:\/\/roboforex.com/blog\/blog\/2020\/08\/20\/what-is-volatility-and-how-to-use-it-on-forex\/\" data-internallinksmanager029f6b8e52c=\"150\" title=\"Volatility\">volatility<\/a> in <a href=\"https:\/\/roboforex.com/blog\/blog\/2019\/06\/26\/how-to-trade-on-forex\/\">Forex<\/a> is mostly influenced not by the complex CPI but by its Core part.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_CPI_and_inflation\"><\/span>The CPI and inflation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Anyone who knows something about economics would say that high <a href=\"https:\/\/roboforex.com/blog\/blog\/2022\/06\/30\/what-is-inflation-reasons-and-consequences\/\" data-internallinksmanager029f6b8e52c=\"220\" title=\"Inflation\">inflation<\/a> is bad while low inflation is very good.<\/p>\n\n\n\n<p>Is it, indeed, true, and what does the CPI have to do with it?<\/p>\n\n\n\n<p>For developed countries, the average CPI is 2.0-2.5%. If the CPI lies in this range, the economy is doing well, in balance with production, purchas ing power, and inflation. The task to the government of the country and the Central Bank is to hold the prices within this range, avoiding any negative outcomes.<\/p>\n\n\n\n<p>If the CPI is below 2.0%, the economy is doing bad, and the national currency might suffer or d evaluate. In such circumstances, the CB interferes with the economy and takes certain measures to stabilize it. If the CPI is zero or negative, this might end up in negative inflation (deflation), which is even worse for the economy.<\/p>\n\n\n\n<p>If the CPI rises above 2.5%, this is also quite harmful for the economy. The job of the Central Bank bis to track the CPI and support the economy in time.<\/p>\n\n\n\n<p>The CPI is closely connected to other key <a href=\"https:\/\/roboforex.com/blog\/blog\/2019\/11\/07\/economic-indicators-the-basis-for-forex-trading-strategy\/\">economic indices<\/a>: the <a href=\"https:\/\/roboforex.com/blog\/blog\/2019\/10\/29\/trading-news-how-to-make-money-on-gdp\/\" data-internallinksmanager029f6b8e52c=\"93\" title=\"GDP\">GDP<\/a> and unemployment rate. If the economy does all right, we have a high employment rate and low unemployment. Hence, the GDP is high and the income of citizens is acceptable. People of the country are confident about tomorrow and start spending more, making money participate in the economic process. Demand generates supply, and prices grow, so does the CPI in the reporting period.<\/p>\n\n\n\n<p>If people of the country are not confident about the future and feel something bad coming, they start saving money, buying just the essentials, avoiding luxuries or putting money in the jar. Hence, production shrinks, the unemployment grows because less people are involved in the economy, as a result &mdash; the CPI also falls.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Influence_of_the_CPI_on_Forex\"><\/span>Influence of the CPI on Forex<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>When the CPI is published, now should trade carefully. If you are a beginner, track the <a href=\"https:\/\/roboforex.com\/beginners\/analytics\/economic-calendar\/#:~:text=The%20Forex%20Economic%20calendar%20is%20an%20efficient%20tool%20that%20contains%20up%2Dto%2Ddate%20information%20about%20upcoming%20events%20in%20the%20financial%20industry.%20The%20data%20from%20the%20Economic%20news%20calendar%20helps%20traders%20to%20analyze%20the%20situation%20of%20Forex%20and%20make%20plans%20based%20on%20the%20information%20they%20get\" target=\"_blank\" rel=\"noreferrer noopener\">economic calendar<\/a> and avoid opening positions when important news is due. Do not hope that you will be lucky this time, <a href=\"https:\/\/roboforex.com/blog\/blog\/2020\/08\/20\/what-is-volatility-and-how-to-use-it-on-forex\/\">volatility<\/a> might surge, and you might suffer losses.<\/p>\n\n\n\n<p>For experienced traders who know <a href=\"https:\/\/roboforex.com/blog\/blog\/2019\/07\/18\/the-basics-of-fundamental-analysis\/\">fundamental analysis<\/a>, the CPI might yield profit.<\/p>\n\n\n\n<div class=\"block-banner dark_blue-light_blue \">\n    <div class=\"block-banner__content\">\n      <div class=\"block-banner__text-content\">\n        <p class=\"block-banner__title\">Discover the <span class=\"nowrap\">R MobileTrader app<\/span><\/p>\n        <p class=\"block-banner__text\">Get a portable trading workstation on your phone. Click on the button and install the application!<\/p>\n      <\/div>\n    <div class=\"block-banner__images-wrapper\">\n      <img decoding=\"async\" class=\"block-banner__image block-banner__image_mobile\" src=\"\/wp-content\/uploads\/2023\/09\/mt-mobile.png\" alt=\"mobiletrader\">\n    <\/div>\n      <div class=\"block-banner__store-buttons\">\n        <a href=\"https:\/\/mobiletrader.onelink.me\/MuKg\/rfbannerandroid\" class=\"block-banner__store-button block-banner__store-button_google\" target=\"_blank\" rel=\"noopener nofollow\"><img decoding=\"async\" src=\"\/wp-content\/themes\/robo-blog-2021\/images\/footer\/google-play-en.svg\"><\/a>\n\n        <a href=\"https:\/\/mobiletrader.onelink.me\/MuKg\/rfbannerios\/\" class=\"block-banner__store-button block-banner__store-button_apple\" target=\"_blank\" rel=\"noopener nofollow\"><img decoding=\"async\" src=\"\/wp-content\/themes\/robo-blog-2021\/images\/footer\/app-store-en.svg\"><\/a>\n      <\/div>\n    <\/div>\n    <div class=\"block-banner__images-wrapper\">\n      <img decoding=\"async\" class=\"block-banner__image block-banner__image_desktop\" src=\"\/wp-content\/uploads\/2023\/09\/mt-desktop.png\" alt=\"mobiletrader\">\n    <\/div>\n  <\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_use_the_CPI\"><\/span>How to use the CPI<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If you decide to make some profit on the publication of the CPI, keep in mind the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Previous CPI<\/li>\n\n\n\n<li>Forecast CPI<\/li>\n\n\n\n<li>Price dynamics and market reaction to the CPI previously<\/li>\n\n\n\n<li>GDP and unemployment rate (comparing to the previous values)<\/li>\n\n\n\n<li>Your <a href=\"https:\/\/roboforex.com/blog\/blog\/2019\/10\/18\/money-management-what-is-it-part-1\/\">money management rules<\/a><\/li>\n<\/ul>\n\n\n\n<p>Example:<br>Checking the <a href=\"https:\/\/roboforex.com\/beginners\/analytics\/economic-calendar\/#:~:text=The%20Forex%20Economic%20calendar%20is%20an%20efficient%20tool%20that%20contains%20up%2Dto%2Ddate%20information%20about%20upcoming%20events%20in%20the%20financial%20industry.%20The%20data%20from%20the%20Economic%20news%20calendar%20helps%20traders%20to%20analyze%20the%20situation%20of%20Forex%20and%20make%20plans%20based%20on%20the%20information%20they%20get\" target=\"_blank\" rel=\"noreferrer noopener\">economic calendar<\/a>, you see that on August 11th, 2021, a package of US financial news was published, including the CPI.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><a href=\"https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-eng.png\"><img loading=\"lazy\" decoding=\"async\" width=\"671\" height=\"630\" src=\"https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-eng-671x630.png\" alt=\"The CPI published in the economic calendar\" class=\"wp-image-9571\" srcset=\"https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-eng-671x630.png 671w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-eng-213x200.png 213w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-eng-768x721.png 768w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-eng-150x141.png 150w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-eng.png 827w\" sizes=\"(max-width: 671px) 100vw, 671px\" \/><\/a><figcaption class=\"wp-element-caption\"><em>The CPI published in the <a href=\"https:\/\/roboforex.com\/beginners\/analytics\/economic-calendar\/#:~:text=The%20Forex%20Economic%20calendar%20is%20an%20efficient%20tool%20that%20contains%20up%2Dto%2Ddate%20information%20about%20upcoming%20events%20in%20the%20financial%20industry.%20The%20data%20from%20the%20Economic%20news%20calendar%20helps%20traders%20to%20analyze%20the%20situation%20of%20Forex%20and%20make%20plans%20based%20on%20the%20information%20they%20get\" target=\"_blank\" rel=\"noreferrer noopener\">economic calendar<\/a><\/em><\/figcaption><\/figure><\/div>\n\n\n<p>In the previous reporting period the indicator value amounted to 0.9%, and the forecast new index was 0.5%. This is what happened: the current CPI is 0.5%, exactly as forecast.<\/p>\n\n\n\n<p>In the next picture, see the dynamics of the CPI over previous periods.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><a href=\"https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-USA.png\"><img loading=\"lazy\" decoding=\"async\" width=\"732\" height=\"630\" src=\"https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-USA-732x630.png\" alt=\"CPI dynamics in the USA in 2021\" class=\"wp-image-9572\" srcset=\"https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-USA-732x630.png 732w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-USA-232x200.png 232w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-USA-768x661.png 768w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-USA-150x129.png 150w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-USA-USA.png 823w\" sizes=\"(max-width: 732px) 100vw, 732px\" \/><\/a><figcaption class=\"wp-element-caption\"><em>CPI dynamics in the USA in 2021<\/em><\/figcaption><\/figure><\/div>\n\n\n<p>On the <a href=\"https:\/\/roboforex.com/blog\/blog\/2020\/07\/09\/how-to-trade-eur-usd-currency-pair\/\">EUR\/USD<\/a> chart below you can see this candlestick very well, it stands out among all others as it is sized over 300 points. Also, before the publication of the news, the quotations decreased volatility, and the market was awaiting. After the publication, when market players saw the result, they started being active.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-EURUSD-M30.png\"><img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"566\" src=\"https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-EURUSD-M30-1200x566.png\" alt=\"Reaction of EUR\/USD on the CPI publication in the USA\" class=\"wp-image-9573\" srcset=\"https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-EURUSD-M30-1200x566.png 1200w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-EURUSD-M30-360x170.png 360w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-EURUSD-M30-768x362.png 768w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-EURUSD-M30-1536x724.png 1536w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-EURUSD-M30-150x71.png 150w, https:\/\/roboforex.com/blog\/wp-content\/uploads\/2021\/08\/CPI-EURUSD-M30.png 1919w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><\/a><figcaption class=\"wp-element-caption\"><em>Reaction of <a href=\"https:\/\/roboforex.com\/beginners\/info\/charts\/forex\/eurusd\/\" data-internallinksmanager029f6b8e52c=\"35\" title=\"EUR\/USD\">EUR\/USD<\/a> on the CPI publication in the USA<\/em><\/figcaption><\/figure>\n\n\n\n<p>As long as that day the CPI was published alongside other statistics, the whole package influenced the dynamics of <a href=\"https:\/\/roboforex.com\/beginners\/info\/charts\/forex\/eurusd\/\">EUR\/USD<\/a> significantly, and the quotation rose. The CPI dropped, and this means people started spending less, so the unemployment rate might grow and the GDP might fall.<\/p>\n\n\n\n<p>If the CPI value had been higher than forecast, the currency of country would have grown.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bottom_line\"><\/span>Bottom line<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As long as the CPI is published alongside other indices, market volatility might surge.<\/p>\n\n\n\n<p>If you trade the CPI by <a href=\"https:\/\/roboforex.com/blog\/blog\/2019\/07\/18\/the-basics-of-fundamental-analysis\/\" data-internallinksmanager029f6b8e52c=\"57\" title=\"Fundamental analysis\">fundamental analysis<\/a>, US and Chinese news is the best because European indices do not always influence the quotations significantly.<\/p>\n\n\n\n<p class=\"wp-block-button aligncenter\">\n<a class=\"button button-green\" href=\"https:\/\/my.roboforex.com\/en\/register\/\" rel=\"nofollow\">Open Trading Account<\/a><\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"<p>The article is devoted to the Consumer Price Index (CPI), its connection to other indices, the GDP, and unemployment. Also, the use of the index in Forex is discussed.<\/p>\n","protected":false},"author":21,"featured_media":9568,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[29],"tags":[2284,159,53],"class_list":["post-9567","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-education","tag-consumer-price-index","tag-economic-calendar","tag-fundamental-analysis-in-trading"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Is Consumer Price Index (CPI) and How to Use It in Forex Trading?<\/title>\n<meta name=\"description\" content=\"Unpacking the Consumer Price Index (CPI): its relation to GDP, unemployment, and application in Forex.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/roboforex.com/blog\/blog\/2021\/08\/25\/what-is-consumer-price-index-and-how-to-use-it-in-forex\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What Is Consumer Price Index (CPI) and How to Use It in Forex Trading?\" \/>\n<meta property=\"og:description\" content=\"Unpacking the Consumer Price Index (CPI): its relation to GDP, unemployment, and application in Forex.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/roboforex.com/blog\/blog\/2021\/08\/25\/what-is-consumer-price-index-and-how-to-use-it-in-forex\/\" \/>\n<meta property=\"og:site_name\" content=\"R Blog - 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