The shift in Bank of Canada policy will provide some degree of support to the Canadian dollar, but strong gains look unlikely with underlying selling liable to return on any moves towards parity.

The Canadian dollar remained under pressure close to the 1.03 level against the US dollar ahead of the interest rate decision on Tuesday. Markets were expecting a 0.25% interest rate cut but the central bank decided to leave interest rates on hold at 3.00%.

The bank was still cautious over the economy, but it did state that some of the downside threats had eased. There was increased unease over the inflation outlook and the bank has effectively dropped the near-term bias for an easing of policy.

The Canadian dollar jumped stronger following the rate decision with a move to 1.02 and consolidated around 1.0220 on Wednesday before pushing to 1.0180 as commodity prices rallied.

The Canadian currency will gain some further support from the bank shift, but this will be offset by the similar change in emphasis among most central banks.