Geopolitical events can have a major impact on the forex market because they create uncertainty, affect investor sentiment, and influence central bank policies. Here’s how different types of geopolitical events can affect forex trading: 1. Wars & Military Conflicts Cause risk aversion, making investors move to safe-haven currencies like the USD, CHF, and JPY. Increase volatility, especially in currencies of the involved countries. Affect commodities like oil and gold, impacting commodity-backed currencies (CAD, AUD, NOK). 2. Elections & Political Uncertainty If a leader with unexpected policies is elected, a country’s currency can see a sudden drop (e.g., GBP during Brexit uncertainty). A stable and pro-business government can strengthen a currency. 3. Trade Wars & Sanctions Trade restrictions can hurt a country’s economy, weakening its currency. If a major exporter (like China or Germany) faces sanctions, its currency may depreciate. 4. Central Bank Decisions & Policies Political pressure on central banks can lead to unpredictable monetary policies, affecting forex traders’ confidence. Interest rate decisions influenced by geopolitical risks can drive currency strength or weakness. 5. Natural Disasters & Pandemics Disrupt economic activities, causing depreciation in affected currencies. Increase demand for safe-haven currencies. 6. Geopolitical Alliances & Trade Agreements Positive trade agreements (e.g., USMCA) can boost a currency. Deteriorating alliances (e.g., Brexit) can weaken a currency.