The Consumer Price Index (CPI) measures the rate of inflation (i.e., the rate of price changes) experienced by consumers when purchasing goods and services. A rising trend has a positive effect on the nation’s currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates to bring prices down. Higher interest rates attract foreign investment, thus increasing demand for the nation’s currency. CPI is one of the most closely watched indicators and will usually have a high impact upon release.
UPDATED: The Australian CPI release came out as expected at 0.6%, but the trimmed mean CPI (similar to core cpi) was lower by 0.4% (0.3% v 0.7% E). We watched for market reaction and waited for a retracement and entered on a SELL AU trade at 1.0394. After just a few minutes, we closed the trade with 25 pips profit, but it eventually reached our target TP of 30 pips.