For a country’s population, an increase in CPI signifies that the cost of living is rising, and the currency’s purchasing power is decreasing
For traders, the CPI release is an opportunity to trade currency pairs and indices on the news.
When the CPI growth is high, it’s more likely that the country’s central bank will raise its interest rate to contain inflation. This results in an increase in demand for the domestic currency, causing it to go up in the short term after an upside surprise in CPI. However, the country’s indices may fall as higher rates increase business costs.
On the other hand, low CPI growth may prompt a country’s central bank to consider a rate cut. This decreases demand for the domestic currency, causing it to go down in the short term after a downside surprise in CPI. Conversely, stock indices may rise as lower rates will decrease business costs.
At Olymp Trade, we closely monitor CPI changes and provide our traders with valuable insights and analysis on the impact of CPI on the financial markets. Stay informed and make better trading decisions with us
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