Geopolitical risk: how do you model something unquantifiable?
Conflicts, sanctions and supply shocks don't fit spreadsheets, but they dominate currency moves when they hit. Traders cope with scenario thinking: what would a disruption do to oil, to havens, to specific pairs — before it happens.
How do you prepare?
- the scenarios you've mapped in advance
- how you size positions when geopolitics heats up
- the event that reshaped your model
The safe-haven guide and oil guide cover the two classic channels.
Background: Oil and currencies: why crude prices move the Canadian dollar
Crude oil links energy markets to currencies through trade, inflation and interest rates. How that works for the Canadian dollar, and why the link isn't fixed.
Why does oil affect the Canadian dollar?
Crude oil is one of Canada's largest exports. Higher prices increase export earnings and demand for Canadian dollars, and they also affect inflation and interest rate expectations.
Does USD/CAD go down when oil goes up?
Often, because a stronger Canadian dollar pushes USD/CAD lower. But the relationship isn't fixed: interest rates, trade relations and risk sentiment can outweigh oil.
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