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Your Currency Trade on Nonfarm Payrolls

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Many New York and New Jersey communities are in the process of recovering from Hurricane Sandy, but the superstorm is still likely to pack a wallop when it comes to this week's nonfarm payroll report.

Forecasts call for job growth of just 100,000, a sharp decline from the 171,000 increase in the most recent report. And while the reason for the likely drop are clear, investors may still react negatively, say the currency strategists at Barclays Capital.

"We expect modest downside surprises from both NFP and unemployment data," they wrote in a report to clients. "And a knee-jerk negative reaction is likely" in the currencies of Canada and Mexico, since those countries' fortunes are so closely tied to the health of the U.S. economy.

As for a trade, the BarCap strategists recommend selling the Mexican peso against the yen. They see the yen benefiting as a safe-haven currency that is not being hit by a new sign of weakness. And the peso, they say, is a straightforward candidate for selling, while the Canadian dollar could be affected by an upcoming Canadian employment report.

Step lively, though. The strategists warn that "distortion due to Hurricane Sandy and expectation on further BoJ easing means the impact may not persist."

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USD/MXN
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USD/JPY
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