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Repeats Story Initially Transmitted at 18:02 GMT Jan 5/13:02 EST Jan 5
By Yali N'Diaye
     OTTAWA (MNI) - The December jobs report that, once again, surprised
analysts on the upside, is raising the odds of a Bank of Canada rate hike as
soon as this month, analysts said.
     In that regard, the central bank's own Business Outlook Survey (BOS) due
Monday could seal the deal.
     Statistics Canada reported Friday that the Canadian economy added 78,600
jobs in December, bringing the total gain for 2017 to 422,500, the largest
expansion since 2002. 
     The unemployment rate fell 0.2 percentage points to a record low 5.7%, with
the participation rate rising to 65.8% from 65.7%, while analysts had expected
the unemployment rate to tick up to 6.0%.
     On the wage front, average hourly wage growth for permanent workers
accelerated to 2.9% from 2.7% year-over-year, the largest increase since April
2016.
     So "a January rate hike now appears likely in light of the robust jobs
data," TD economist Brian DePratto told MNI.
     RBC analysts are also planning to change their BOC call to move the next
tightening to January, economist Josh Nye also told MNI.
--WEAK TRADE OVERSHADOWED
     The disappointing goods trade data also released Friday were overshadowed.
     Statistics Canada reported that the merchandise trade deficit widened to
C$2.5 billion in November from C$1.6 billion in October, while analysts had
expected an improvement.
     While exports increased 3.7% on the month, they only edged up 0.6% on a
real term basis. In fact, if not for autos and parts, real exports were even
down 1.4%.
     RBC Assistant Chief Economist Paul Ferley noted in a commentary that trade
data suggest net exports made no contribution to GDP in the fourth quarter.
However, that would still be an improvement from the previous quarter.
     In addition, growth is expected to remain above potential, he said.
"Confirmation of such is being provided by wage pressures starting to emerge as
evidenced by this morning's Canadian employment report."
     "Such an environment argues for policy to continue to tighten with recent
data pointing to the growing probability of a 25 basis point hike in the
overnight rate as soon as the next policy meeting January 17," Ferley commented.
     "Given the tremendous progress made in narrowing labor market slack - an
area highlighted by the Bank of Canada in recent communication," CIBC analyst
Nick Exarhos also said in a commentary, "that today's (jobs) report is enough to
push Governor Stephen Poloz into a rate hike later this month."
--WATCHING BOC SURVEY
     "It is clear that today's job report rises the probability of a rate hike
in January," Desjardins Senior Economist Mathieu D'Anjou told MNI, putting the
probability of a hike on January 17 at 50%.
     Should Monday's Business Outlook Survey come in strong, he continued, "we
may move our expectations for the next rate hike from March to January."
     However, Capital Economics analysts are not "convinced."
     "With NAFTA's future hanging in the balance, we still doubt that the Bank
of Canada will risk raising interest rates early this year, as markets now
expect," wrote Senior Canada Economist David Madani.
     "In addition, we also still believe that housing-related risks will prevent
the Bank from raising rates later this year."
--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com