Economic Update

30 March 2026

US troop build-up intensifies as Middle East war enters second month

The US continued to deploy additional troops and equipment to the Middle East, reinforcing naval and ground capabilities. This reflects a dual-track approach that combines military deterrence with offers of diplomatic engagement towards Iran. Conditions on the ground remain largely unchanged, with the US and Israel targeting strategic positions within Iran, while Iran continues to strike civilian, military and energy infrastructure across the region.

Pakistan indicated its willingness to facilitate negotiations in the coming days, following President Trump’s decision last week to delay a campaign targeting Iran’s power infrastructure.

Ongoing geopolitical risks could continue to support the USD against the EUR, GBP and JPY. However, despite USDJPY briefly testing ¥160, both GBPJPY and EURJPY moved lower in recent sessions. Recent OECD forecasts suggest Europe faces comparatively greater economic risks than other major regions.

Markets await US payrolls as challenges grow for the Federal Reserve

Market participants have largely set aside recent economic indicators, focusing instead on the broader implications of the escalating Middle East conflict for activity and inflation. However, attention will shift back to data at the end of the week when the US releases its March non-farm payrolls.

Following a weak February print, expectations point to a sharp rebound, with several one-off distortions at play last month, including adverse weather and the partial government shutdown. A weaker March figure remains a possibility, particularly given broader signs of slowing momentum within the US economy.

The labour market data will arrive in a lower-liquidity environment with the UK and Euro Area markets closed for the Easter holiday. Before then, the US will release March consumer confidence, February JOLTS job openings, the ADP employment survey, retail sales and Challenger job cuts. These indicators carry downside risk and could temporarily weigh on the USD if they collectively point to softer activity.

UK political uncertainty continues to weigh on GBP sentiment

Prime Minister Starmer has received more favourable press coverage for his response to the Middle East conflict, but weekend polling showed no improvement in voter support for Labour ahead of future elections. Questions surrounding former Chief of Staff Morgan McSweeney also persist. Senior Labour figures defended procedural failures, and the Met Police is reviewing CCTV footage related to McSweeney’s account of events.

These political challenges could influence the upcoming regional and local elections in early May and may renew speculation around the UK leadership.

With limited domestic data this week and Q4 GDP revisions unlikely to shift the narrative, markets will focus on the Gulf conflict’s implications for activity and inflation. Political uncertainty remains an underlying risk for GBP relative to currencies facing fewer near-term political pressures. GBPEUR, GBPJPY and GBPCNY all sit towards the bottom of recent trading ranges.

Provisional Euro Area CPI expected to show a sharp rise in price pressures

The key Euro Area release this week is the provisional CPI print for March. Early data points to a notable rise in headline inflation driven by higher energy and fuel costs following the deterioration in conditions across the Middle East.

ECB officials have indicated they stand ready to support a rate increase as early as April if the data warrants it. While inflation remains an immediate concern, the medium-term focus lies on employer hiring intentions and broader economic activity.

The EUR continues to struggle against the USD, recently testing below $1.15. Additional rate hikes may do little to support the EUR or address energy-led inflation pressures, in my view.

USDCAD tests C$1.39 as Mexico faces potential trade retaliation from China

USDCAD moved above C$1.39 in the latest session, driven by political and technical factors rather than macroeconomic developments. Canada’s calendar remains light this week, though January GDP could prompt renewed debate if it confirms an expected period of stagnation. The Bank of Canada will also publish its summary of deliberations from the March decision to hold interest rates. US data releases later this week could disrupt further USDCAD strength.

In Mexico, attention is shifting from Banxico’s recent surprise rate cut towards trade tensions with China. Mexico’s tariffs on Chinese imports, introduced on 1 January, have contributed to a significant decline in Chinese export orders. China has warned of reciprocal measures, raising the risk of an escalating trade dispute. Downside risks to the peso could intensify if tensions persist over the coming months.

Author 

Views expressed in this commentary are those of the author, and may differ from your appointed Moneycorp representative. This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory.