The Bank of Canada action will certainly limit the scope for Canadian dollar gains, although there should be firm support near the 1.30 level.

The Canadian dollar remained under pressure on Tuesday and again tested support levels beyond 1.29 against the US dollar ahead of the interest rate decision.

The Bank of Canada interest rate decision was in line with market expectations with a further 0.5% in rates to a record low of 0.50%. The statement from the bank was more dovish than expected with the bank suggesting that further action may be required. There will also be greater speculation that the bank will move towards quantitative easing to help support the economy, especially with exports remaining under pressure.

The policy stance will continue to be a negative factor for the Canadian currency and this will certainly limit support. Canadian dollar trends will also be influenced strongly by trends in global risk appetite with the currency gaining support if there is any recovery in confidence