I just thought I'd make a quick post about Consumer Price Index seeing as we have a CPI release tomorrow. As a trader you must be aware of the economic releases that move your market. Only the ignorant ignore economic releases, and those who do ignore them tend to wipe out their accounts quite quickly. When you're on a trading floor, one of the quickest ways to get fired when you first start out is by having orders in the market just before the release.
So what's the big fuss then? Well from a traders point of view, the release of economic data, depending on it's result, will shift the balance of supply and demand in the market which will give traders an opportunity to profit. Not all economic releases have a big impact on the markets, however the Consumer Price Index is one of the big figures that does, alongside other figures such as Non Farm Payroll.
A consumer price index (CPI) is a measure estimating the average price of consumer goods and services purchased by households.
The CPI measures a price change for a constant market basket of goods
and services from one period to the next within the same area. This area
can be a city, region, or country.
This is a price index determined by measuring the price of a standard
group of goods meant to represent the typical market basket of a typical
urban consumer.
It is one of several price indices calculated by most national
statistical agencies. The percent change in the CPI is a measure
estimating inflation. The CPI is frequently used to adjust for the
effect of inflation on the real value of money. For example, wages,
salaries, pensions, Treasury Inflation-Protected Securities (TIPS) and regulated or contracted prices will be increased (or decreased) according to changes in the CPI.
The CPI is one of the most closely watched national economic statistics.
