When a country's CPI rises, it indicates that its inflation rate rises, and it also means that its currency's purchasing power weakens and its exchange rate declines. According to the purchasing power parity theory, its currency should weaken. On the contrary, when a country's consumer price index drops, it shows that the country's inflation rate drops, that is, the purchasing power of the currency rises. According to the purchasing power parity theory, the country's currency should strengthen. However, because all countries take controlling inflation as their primary task, rising inflation also brings opportunities for rising interest rates, so it is beneficial to the rise of the country's currency exchange rate; If the inflation rate is controlled and falls, the interest rate will also tend to fall, which is not conducive to the rise of the country's currency.
CPI, the Consumer Price Index, is a measure of the price of a fixed basket of consumer goods, which mainly reflects the price changes of goods and services paid by consumers. It is also a tool to measure the level of inflation, expressed in percentage changes. In the United States, the main commodities that constitute this indicator are divided into seven categories, including: food, wine and beverage houses; Clothing; Transportation; Medical health; Entertainment; Other goods and services. In the United States, the consumer price index is published by the Bureau of Labor Statistics every month, and there are two different consumer price indexes. The first is the consumer price index of workers and staff, referred to as CPW. The second is the consumer price index of urban consumers, referred to as CPIU.