By Gary Howes

The Canadian dollar (CAD) is displaying fresh strength on Tuesday afternoon in London and the correction lower in the pound sterling vs Canadian dollar could extend further.

The Canadian dollar will be higher in sympathy with a resurgent Australian dollar. The CAD and AUD are often lumped together in the 'commodtiy currency' class and today's action at the RBA will have prompted traders with a timely reminder that central banks still have the power to surprise.

These same traders will be asking whether the Bank of Canada is actually as accommodating as it has been letting on.

A look at the markets shows:

The pound sterling to Canadian dollar exchange rate (GBP/CAD) is 0.37 pct lower on a day-to-day basis having reached 1.8066.The euro to Canadian dollar exchange rate (EUR/CAD) is 0.42 pct lower at 1.4976.The US dollar to Canadian dollar (USD/CAD) is 0.35 pct lower at 1.1079.Note: Our CAD quotes are taken from the wholesale spot markets. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.

Further declines ahead for the pound and US dollar vs the Canadian dollar

The pound sterling to Canadian dollar exchange rate could continue its correction lower in the near-term, particularly on the observation that today's good Construction PMI out of the UK appears to have been ignored outright.

Nevertheless, we will look for the GBP/CAD to consolidate at current levels ahead of a potential return to strength.

Indeed, Shaun Osborne at TD Securities remains bullish on the pairing saying, "short-tem, losses are likely to extend a little lower through to the high 1.79s at least, but we still rather think that the broader trend higher is so deeply entrenched in the market that scope for a significant correction lower remains limited at the moment. Monitor, look for buying opportunities."

Osborne is also predicting a similar decline in the USD/CAD:

"We are still not convinced that the correction lower in USDCAD is over—the move off Friday’s high to yesterday’s low was the biggest correction in funds since late September. Given that the Friday/Monday dip was just a little over 170 ticks, that says a lot about the strength of the rally in funds recently—and the lack of a meaningful dip in the past few weeks. Perhaps something more substantial is overdue."

For today, we look for more range-trading, with a modest downward bias.

There are no Canadian data and US numbers are mainly second-tier. Weakness below 1.1045 short-term technical support will be a “heads up” that a deeper slide in USDCAD is perhaps getting more traction.

$2.9 trillion has been wiped from global equities

The global plunge continues into the afternoon with European shares playing catch-up from yesterday’s steep losses incurred in the US session.

"So far, $2.9 trillion has been wiped from global equities this year as investor’s fear the global economy is stuttering. With the Federal Reserve trimming their bond purchases, investors are now questioning if the US economy is strong enough to support itself without Fed assistance," says Lee Mumford at Spreadex.

On a lighter note, figures have shown British construction activity unexpectedly picked up more than expected in January, reaching its highest level since the financial crisis.

The Purchasing Managers Index showed an increase to 64.6, much better than the 61.6 expected.

US futures are indicating a higher open, rebounding from their largest loses since June. Yum Brands and Michael Kors Holdings traded higher before the open after reporting better than expected earnings.