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What every FX trader should master about the Consumer Price Index


Microeconomic Indicator in FOREX:


Acronym Expansion:

Consumer Price Index

What is the Consumer Price Index?

The Consumer Price Index basically determines the average change in prices that consumers used to pay for the market basket. The market basket is nothing but the sum total of all the goods and services that are prevailing in the market. It covers close to 180 categories which are grouped into 8 major super categories like Food & Beverage, Transportation, Health care, etc. CPI measures the price point change of this entire market basket which covers around 80,000 goods & services combined. This index calculated and determined by the Bureau of Labor Statistics.

CPI is calculated by dividing the average cost of the market basket in the current year by the cost of the market basket in the base year and multiplying the result with 100. This gives us the CPI of the current year. The calculation involved during this process of estimation of CPI is extremely difficult. This is because thousands of categories and sub-categories along with their ever-changing prices should be considered and classified into urban or rural consumption segments. Then based on these the overall index is calculated. CPI is the most important statistics for an economy as it measures inflation and gives us an idea of the cost of living. According to economic experts, CPI is considered as the benchmark inflation guide for a country’s economy.


What does CPI measure?

The CPI measures & forecasts inflation which is considered as one of the biggest threats to the economy of a country. The governments and central banks use the consumer price index to decide on the modification of economic policies in order to prevent inflation. The consumer price index is also used by the government agencies to determine appropriate prices of many other government economic indicators like the gross domestic product, interest rates, etc. CPI is also used by governments to improve the benefit levels of major government programs such as social security.


Reliable sources of information on ‘Consumer Price Index’ for Major currencies:

There is a lot of information with respect to the CPI of different countries in the sources provided below. You can familiarize yourself with the CPI of the respective country along with the historical data related to that. You can also compare the Consumer Price Indices of one country to the other using this web portal. The graphical representation of the historical data will give you a clear understanding of how this data changed over time. You also get to change the graphical representations according to your preference. A ton of more information related to the latest news in that regard is provided to give you a better understanding.


GBP (Sterling) – https://tradingeconomics.com/united-kingdom/consumer-price-index-cpi

AUD – https://tradingeconomics.com/australia/consumer-price-index-cpi

USD – https://tradingeconomics.com/united-states/consumer-price-index-cpi

CHF – https://tradingeconomics.com/switzerland/consumer-price-index-cpi

EUR – https://tradingeconomics.com/euro-area/consumer-price-index-cpi

CAD – https://tradingeconomics.com/canada/consumer-price-index-cpi

NZD – https://tradingeconomics.com/new-zealand/consumer-price-index-cpi

JPY – https://tradingeconomics.com/japan/consumer-price-index-cpi


What do traders care about the Consumer Price Index and its impact on the currency?

The consumer price index is one of the most important microeconomic indicator considered by the traders in the Forex market. With respect to the US dollar, the release of the CPI figures which are published by the Bureau of Labor Statistics will have an impact on the value of the dollar. Experienced forex experts say that these CPI values can produce swings in the value of the dollar against other currencies around the world. Also, CPI measures the change in the consumer prices which account for a majority of overall inflation. Inflation is key to currency valuation because rising prices will eventually lead the central banks to raise interest rates which will have a direct impact on the currency.


Frequency of the release

 CPI is generally released on a monthly basis by the Bureau of Labor Statistics. However, there are a couple of exceptions. Australia and New Zealand governments release their CPI data on a quarterly basis. Even though the frequency of CPI data is ‘monthly’ for most of the countries, the released/published dates are slightly different. Below is the accurate information of the frequency and release dates of the CPI data for the respective countries and currencies.

NZD – Released quarterly, about 18 days after the quarter ends

AUD – Released quarterly, about 25 days after the quarter ends

JPY – Released monthly, usually on the third Friday of the following month

CAD – Released monthly, about 20 days after the month ends

EUR – Released monthly, on the last business day of the current month

GBP – Released monthly, about 16 days after the month ends

USD – Released monthly, about 16 days after the month ends


The Bottom Line

The Consumer Price Index is an important indicator for pricing pressures in an economy as it provides a gauge of inflation. Forex traders closely monitor the CPI data, as it can have a direct impact on the changes that are done by the central banks to the country’s monetary policy. These changes will either strengthen or weaken the value of the currency against rivals in the markets. Also, the appreciation and depreciation of a currency can have a strong impact on the financial performance of global companies which have their presence in foreign nations. Traders should closely monitor the CPI values in order to keep themselves updated with the price increments or decrements and also can use their own discretion to forecast the inflation by using this data.



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