US NFP : Some Thoughts

• Reuters expectation for Mar10 US NFP released on Friday = +190k vs Feb10 = -36k.
• Red line = 0. Black line = +190k. From the chart, I think that a number anywhere close to consensus (or above +100k) would be a very positive development. The bar is indeed set quite low for a sea change in outlook from negative on the economy to the other side.
• Expect an outcome >+100k =>  Big swing from relaxed outlook to concrete expectations of Fed policy tightening.
• Best vehicle for bet on market expecting Fed tightening = Long USD/FX (neglible carry considerations either way, apart from vs AUD). Not short Rates because of steep negative carry. Not long Commodities because positive economic outlook = positive for commodities but the USD correlation works against. Equities is a tough call because of positive technicals. So .. best risk/reward for a bet on Fed tightening in FX vehicles.
• My Core Book is for a step-up in Fed rate hike expectations and constructed on the above considerations. Am 1. Long USD vs [-EUR, -GBP, -JPY]. 2. Short USD vs [+CAD, +Gold, +Copper]. Netting the 2, naked position is about 10% EAR in favor of 1 (ie net long USD).
• It matters little when ACTUAL Fed tightening takes place; all I am betting on is that market will move to price in more or earlier in event of a good NFP.