We have heard the term “CPI” a lot, but what exactly is it and how does it affect the forex market? That’s something a lot of us does not understand, and today we will dig into the major impact of this report and how we are able to turn it into profit. The Britain CPI report is releasing at 09:30GMT this morning, take a look at this article before the release and get ready to make some real profit after the release!
The Consumer Price Index is what CPI stands for. The particular report is the principle indicator on the prices of goods and services, it indicates whether the economy is experiencing inflation, deflation or stagflation. And this is because the prices of goods and services change over time, however if the prices change too much and too rapid, the effects can shock the economy which will directly lead to major movements in the forex market.
Understanding CPI data is important to forex traders because it is a strong measure of inflation which in turn has a significant influence on central bank monetary policy which decides to put a rise or fall on the country’s interest rate.
How to trade the CPI?
When using the CPI data to trade, trader should think how the market is going to react to the result of the report, what happen if the expectations are meet, or what if they are missed.
If you are trading forex, close all your open position before the report is release. Likewise, if you are trading binary options, before the release do not place position because before the release, the market is in a panic mode and try to guess whether the expectation is going to meet or miss, and during this period the price movement is hard to predict.
Generally speaking, if the actual result of the report is higher or lower than expectations, it will have the ability to influence the market. If the result is higher than expectation, it can be seen as a bullish sign for the GBP, and if the result is lower than expectation, it indicates a possible bearish movement for the GBP.
The expectation of this month release is 1.5%, keep an eye on the result of the report after the release and try to spot profit chances by trading the GBP pairs! Take a look at this article below if you are wondering how to confirm the result of the report. Note that in the article HERE, even though it is written for the NFP report, but you can use the same method to confirm the CPI result.