The Consumer Price Index (CPI) is a widely used economic indicator that tracks the prices of a basket of goods and services. This basket is used to measure changes in the cost of living in a given country or region. As the cost of living rises, so does the CPI. This can have a significant impact on the investments of individuals and companies.
For investors, an increase in the CPI can lead to increased volatility and uncertainty in the markets. This can be seen in the case of oil prices, which fell on Tuesday after the Biden administration announced additional crude sales from the United States. In addition, commodities such as gold and the U.S. dollar can also be affected. commodities analysis by Barani Krishnan of Investing.com covering XAU/USD, US Dollar Index Futures, gold Futures, SPDR® gold Shares, for example, revealed that Asian equities were mixed on light volumes in advance of today's US CPI release as markets appear to have caught onto the Fed's focus on inflation.
When the CPI rises, the underlying trend can show that the U.S. dollar is weakening, as is the case with the USD Index (DXY). This gauge measures the greenback against a basket of its main competitors, and here we can see that it manages to regain some composure and leaves behind the negative effects of the CPI increase.