The Canadian dollar (Currency:CAD) is faltering after a decent European session; however leading into the North American market open:

The pound Canadian dollar exchange rate is 0.18 pct higher than at Wednesday night's close, GBP/CAD is at 1.5964.

The euro Canadian dollar exchange rate is 0.12 pct lower at 1.2675.

The US dollar to Canadian dollar currency pair is 0.15 pct down at 0.9840.

Risk assets had been given a bit of a lift on the back of overnight reports of China injecting a record amount of liquidity ahead of next week’s holiday, but it may have been misinterpreted as stimulus instead just preparation.

Regardless, the mornings Canadian dollar rally has ebbed as has the rally in commodity currencies.

An exchange rate forecast from Bank of America Merrill Lynch has today reiterated their bullish USD/CAD stance - a position that allows for further declines in the Canadian dollar as the risk-on rally, following the Fed’s open-ended QE commitment and ECB’s OMT announcement, unwinds.

"We examine the impact of previous rounds of QE and find that the duration of “risk-on” rallies is reducing over time; however, this latest rally appears to be unwinding even faster. In The precise meaning of diminishing returns, we argue that the impact of QE3 on the USD will be limited," says a note from Naeem Wahid at BofA.

Wahid warns that for the market rally to be sustained we may need to observe strong improvements in economic data.

"Without this, the market rally may be over and as such we maintain our long USDCAD position as global leading indicators continue to point lower," says Wahid.

Unfortunately for the likes of the Canadian dollar such supportive data releases have failed to materialise.