NEW YORK (Forex News Now) – Tomorrow, a major piece of global forex news will be released when the year-over-year German Consumer Price Index is released for the month of September.
Analysts predict that the rate will essentially remain unchanged, holding steady at 1.3% from August. The lack of a rising rate will more than likely cause the European Central Bank to keep interest rates the same.
About the German CPI
The German CPI is a vital economic indicator for the strength of the euro because Germany is the euro zone’s largest economy. As such, any major trends or developments that occur with the German economy inevitably affect the European economy as a whole – and with it, the strength of the euro.
The CPI in particular is a consumer price index that measures the changes in how much various consumer items cost. In other words, the CPI is a valuable gauge when it comes to measuring inflationary pressures within the German economy through global forex news and, by inference, a sizable portion of the euro zone economy.
How the CPI is Calculated
As with other consumer price indices in the global community, the German CPI measures the average cost of major consumer products to gauge whether or not inflation is causing manufacturers to raise prices of their items.
The report looks at changes in prices for a basket of products and services that a typical German household is expected to purchase. Basically, a rise in this index – an indicator of inflation – reveals that more euros are required to buy this same basket of goods, which reduces the overall purchasing power of the euro.
To an extent, the CPI varies based on what goods and services are included in the basket. The index, however, is largely viewed as an excellent indicator of inflation, and a major influence on the euro.
As mentioned, this piece of global forex news is predicted to remain fairly stable, with no sizable increase in inflation in the German economy. It is likely, then, that the euro will not be majorly impacted for better or for worse as a result of the news.
Still, the possibility exists that the official figures will vary from the consensus estimate. If this happens, rising inflation could encourage the European Central Bank to consider raising interest rates, which would increase demand for the euro and cause it to rise.
The euro will more than likely continue to rise against the dollar in the near term if the report’s conclusions are as expected.