Further, CPI works as an Inflation Indicator. Inflation affects everyone from government agencies to businesses and consumers. Therefore, the federal government, usually, uses Consumer Price Index inflation data to execute changes on fiscal policy. If you are eager to join the market, you should check the economic calendar and search for the CPI events that are going to be released in all the important economies in the world such as the economy of United States, Eurozone, United Kingdom, Australia, Japan, as well as other markets.
CPI – Monetary Policy Thermometer
CPI Releases Move the Currency
Usually, inflation or the Customer Price Index is released once every month, most often with some kind of variations. Therefore, inflation does not necessarily appear in the same form in every country. Each inflation is calculated separately.
You need to know that besides the CPI there is also a core inflation. It represents the trend in the price level in the long run. Transitory price changes should be excluded while measuring long run inflation. This can be done if we exclude items which are frequently subject to volatile prices, such as food and energy. Therefore, core inflation can be calculated if we take the Consumer Price Index (CPI) and exclude abovementioned items from the index. However, there are other ways to calculate core inflation like the outliers method, meaning that the products with largest price change are removed from the equation.
What is Monetary Policy Going to Do Next?
Therefore, if you want to trade binary options based on the CPI release, you should consider the bigger expiration date. This means you always have to pick the expiration date which goes beyond your option.
Trading the Consumer Price Index
It means that if you, for instance, want to trade on Australian market or based on an Australian dollar financial product, say AUD-USD, then it is well-known that the trading call options would be a better option. If you are interested in the expiration date, you need to go and check the economic calendar. In the economic calendar, you will find all the necessary information and also see when the next interest rate decision will happen. In that case, the call option should stretch beyond the expiration date in order to successfully expire in the money.
All the things you need to know about the interest rates, inflation, Consumer Price Index are available on the economic calendar, and therefore, make sure that you are familiar with the schedule. You need to be informed and wait for the right information, not only a prediction but also a decision when you decide to participate in the market.
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