CPI (consumer price index)

The Consumer Price Index (CPI) is a key economic indicator that measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. It reflects the cost of living and is calculated monthly by government agencies, comparing current prices to a base period. Components include food, energy, housing, and transportation, weighted according to their importance in household spending.

For retail traders, CPI reports are significant drivers of currency volatility, especially when released unexpectedly. Higher-than-expected CPI can lead to expectations of interest rate hikes by central banks, strengthening the domestic currency. Conversely, lower CPI might suggest rate cuts or a weaker economy, potentially weakening the currency. Traders often use the economic calendar to anticipate these releases and manage risk.