Currency pairs respond to geopolitical events like trade disputes and wars. These aspects often shake global economies and encourage different FX pairs to swing dramatically. If you are a forex trader or plan to try out this venture, remember that.
A good example of a geopolitical event that has significantly impacted currency pairs is the ongoing US-China trade war. It not only affected forex pairs but also touched many other markets. That’s just the tip of the iceberg. Below is a breakdown of 3 noteworthy geopolitical events that have affected forex pairs over the years.
1. The US-China Trade War
The US-China trade war started in 2018 under Trump’s administration and escalated significantly the second time Trump was voted into office. This conflict has been propagated by various factors, from China’s alleged unfair trade practices, which forced the US to implement higher tariffs, to accusations of intellectual property theft and forced technology transfers.
The never-ending US-China fiasco has affected the USD/CNH currency pair significantly. In 2018, the Yuan weakened while the dollar strengthened. The situation reversed in 2025, with the Yuan gaining the upper hand courtesy of numerous factors, including the People’s Republic of China’s commitment to currency stability. The good news is that you can exploit such developments by investing in indices. But first, learn to understand what is indices trading and how does it really work.
2. The Russia-Ukraine War
The hostile relationship between Russia and Ukraine has been brewing for many years. Everything came to a shocking crescendo when Putin’s government decided to launch a full-scale invasion in February 2022 for many reasons, including Ukraine’s expressed interest in joining NATO. This unfortunate turn of events has left hundreds of thousands of soldiers and civilians dead.
This ghastly war has also affected a couple of currency pairs. For instance, it weakened the Euro against the US dollar as the Eurozone’s energy dependency on Russian gas and oil went south. Not to mention, immediately after Russia’s invasion, Russia was excluded from the SWIFT network, and the USD/RUB spiked, with the ruble hitting record lows.
3. Brexit
In 2016, the UK left the European Union, citing concerns about sovereignty, immigration, and economic autonomy. That caught the rest of the globe by surprise, especially since the UK had been a member of the EU and its predecessor, the EEC, for a whopping 47+ years. The move, popularly known as Brexit, was felt economically, politically, and strategically by many nations, from the UK to Australia.
Currency pairs were not spared during the Brexit fiasco. Many were affected, including the GBP/USD and the GBP/EUR. The GBP/USD dropped significantly, with many forex traders and investors selling the pound and buying the US dollar. The same happened to the GBP/EUR pair. The pound weakened for many reasons, including fear of economic consequences and political uncertainty.
Final Thoughts
In today’s fast-paced trading universe, currency pairs respond to more than just interest rates and central bank policies. Geopolitical events like the Russia-Ukraine war, Brexit, and the US-China trade war also influence their movements. Understanding how such aspects affect currency pairs gives you a serious edge as a trader. You also become better at finding profitable opportunities to mitigate your risk exposure.