MUFG Research discusses BoC rate hike expectations.

"The Canadian dollar has been boosted by the hawkish repricing of BoC rate hike expectations. The Canadian rate market has moved to more fully price in a 25bps hike as soon as next week. There are currently around 21bps of hikes priced in compared to only 9bps at the end of last week. Those expectations have been encouraged by three major Canadian banks all changing their rate calls to a hike at next week’s policy meeting," MUFG notes.

"The BoC has recently signalled that they are moving closer to hiking rates. If they place more weight on forward looking measures of inflation risks, and the Candina rate market continues to price in a high probability of a hike heading into next week’s meeting, we expect the BoC to pull the trigger and tighten policy. However, it is not a done deal given the recent softer economic data flow from Canada including the second consecutive month of heavy job losses in September. A decision to raise rates this month would then encourage speculation that they could follow that up quickly with a second hike before the end of this year in December providing more support for the Canadian dollar," MUFG adds.