Hi, I'm Forex Trader Andrea Russo and today I want to talk to you about how the recent geopolitical turmoil is impacting global currency markets. In this week of May 2025, significant events are shaking up the global economic and political balance, with direct repercussions on Forex.
Geopolitical Overview: Rising Tensions
India-Pakistan Crisis
Following the terrorist attack in Pahalgam on April 22, which left 25 Indian tourists dead, relations between India and Pakistan deteriorated rapidly. Artillery exchanges along the Line of Control, diplomatic expulsions and the suspension of the Indus Waters Treaty characterized the following weeks. Although a ceasefire was reached on May 10, the situation remains volatile, with significant impacts on air traffic and regional trade routes.
Wikipedia
Iran-US Nuclear Stalemate
The nuclear talks between Iran and the United States are at a standstill. Tehran refuses to stop enriching uranium and negotiate on its missile program, while Washington insists on these conditions. Iran, under economic pressure from sanctions, may seek support from China and Russia, although these allies face their own geopolitical challenges.
Reuters
"Golden Dome" and US Trade Policies
President Donald Trump has announced the "Golden Dome" project, a $175 billion missile defense system inspired by Israel's Iron Dome. Meanwhile, protectionist US trade policies are generating uncertainty in global markets, with the European Union proposing a "Buy European" strategy to strengthen the bloc's economic autonomy.
The Times of India
Financial Times
FX Impacts: Currency Market Analysis
EUR/USD: Downside Pressure
The euro is under pressure due to trade tensions with the US and domestic economic uncertainties. Proposals to reform public procurement and European defense initiatives could affect investor sentiment. The ECB has highlighted risks to financial stability arising from these tensions.
USD/JPY: Yen Safe Haven
Amid global uncertainty, the Japanese yen is strengthening as a safe haven currency. Tensions in the Middle East and US policies are pushing investors towards safer assets, supporting the yen’s appreciation.
GBP/USD: Towards a New UK-EU Relationship
The UK, under Prime Minister Keir Starmer, is seeking to re-establish closer relations with the European Union, without rejoining the bloc. This pragmatic strategy could reduce economic uncertainty and positively impact sterling in the medium term.
USD/CAD: Influence of Oil Prices
The Canadian dollar is affected by fluctuations in oil prices, influenced by uncertainties in the Iran-US negotiations and tensions in Ukraine. Canada's dependence on energy exports makes the CAD sensitive to these developments.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.