Consumer price index figures can have a massive impact on the exchange rate of currencies. Not only the actual figures, but even trader’s expectations for the CPI figures can cause a great deal of volatility in currency markets. That’s because the CPI is a measure of the inflation in a country, and inflation rates have a large impact on central bank’s decision-making processes. When inflation gets too high it is very likely that the central bank will raise interest rates, and when it is too low, they will lower interest rates. Of course, higher interest rates cause increased demand for a currency, and usually a higher exchange rate, while lower interest rates will usually cause a currency’s exchange rate to fall.