BoC will most likely hike rates - BBH

"It is the only major central bank to meet in the week ahead, and it will most likely hike rates," BBH analysts argue.

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We had thought that the stagnation of the economy net-net since the two rate hikes in Q3 (judging from the monthly GDP readings), signs of softness in house prices in Toronto and Vancouver areas, coupled with the strength of the Canadian dollar and NAFTA uncertainties would have removed any sense of urgency from the central bank.  However, the closing of the output gap and the accelerated jobs growth has given the Bank of Canada what is tantamount as a free option to remove some accommodation, which it says it wants to do.    

The speculative market is not nearly as long the Canadian dollar in the futures market as it was at the end of September. The gross long position of 17.5k contracts compares with 74.6k at the end of Q3. The net long position stood at 58.6k contracts as of January 9.  It was over 100k at the end of September.  Nevertheless, we suspect the market is still vulnerable to buy the rumor sell the fact type of trading, or outright disappointment if the Bank of Canada stands pat.