CPI - Consumer Price Index to shock the Markets again? Trade Idea.
What Is the Consumer Price Index (CPI)?
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living.
The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. It may be compared with the producer price index (PPI), which instead of considering prices paid by consumers looks at what businesses pay for inputs.
As CPI is key in determining Inflation - This Report figure will be the key Before Federal Open Market Committee(FOMC) that will take place on March 16th - where decison on Increase of Interest Rate will be made. Higher Inflation requires even higher Interest Rate to be set to fight inflation - which is bad for the ecomony as it withdraws liquidity from the markets - as opportunity cost of storing money in the bank increases with the Interest Rate.
March 10th CPI will be published at 13:30 UTC time, Results above 0.8% would mean that inflation is higher than already whooping 9.6% YoY and would indicate that FED needs step up on fighting inflation by Increasing Interest rates even further.
This Causes USD to strengthen against other currencies - which is shown by increase in DXY - Dollar Index.
Example : February 10th expected 0.4% - result 0.6%
Conclusion: As inflation gets out of hand - Results come higher than expected- we see USD going up while assets that trades against go down - EURUSD/GOLD/Bitcoin.
This correlation should be used as means to open position as soon as Report is being published. CPI higher than expected you SELL - Bitcoin, Gold,Euro.
if CPI is lower or equal than expected - you Buy Bitcoin,Gold, Euro.
Optimal strategy is to secure profits within 30 minutes after report is being published, as Price may return to starting point(before report was released)