GBP/USD: bulls not out of the woods yet, but BoE's McCaffert mildly-hawkish

Currently, GBP/USD is trading at 1.3131, down -0.90% on the day, having posted a daily high at 1.3251 and low at 1.3122.

GBP/USD has been supported on the back of BoE policymaker Ian McCafferty who was crossing the wires, suggesting that the recent shift in market expectations for a BOE rate rise to late 2017 had reduced the risk of "an unpleasant surprise," as per Reuters reports.

BoE’s McCafferty: No need for QE reversal until bank rate has been increased "several times"

Elsewhere, Sterling had traded sideways in Asia today, but as soon as European traders entered the fray, sterling was sold off heavily to the aforementioned lows.  It has been pushed below $1.32 for the first time since the BOE meeting and concluded the 50% retracement objective of the rally since late August.  The 61.8% retracement is found near $1.3110, ten pips below the low. 

Besides the political uncertainty in the UK and poor data of late with a weakening growth outlook - all weighing on the pound, the dollar was a major contributor to the slide today as well.

The Dollar Index climbed from 93.25 two-day highs at 93.936 the high so far and is testing a weekly top. The US dollar gained strength on the back of rising Treasury yields following US data and comments from Federal Reserve officials. 

US Factory Orders: Signs of manufacturing strength - Wells Fargo

Today’s reports suggested that the negative effects of the hurricanes on economic growth were limited. Initial jobless claims decreased by 12K to 260K (against 265K expected), the trade deficit narrowed August amid rising exports and factory orders rose 1.2% (vs 1.0%). Two FOMC members, Williams and Harker spoke today signalling support for another rate hike before the year-end.

Fed's Williams: Expects gradual rate hikes

Fed’s Harker: Penciled in 3rd hike in December - CNBC

GBP/USD levels

GBP/USD is now en-route for another leg lower towards the 1.2888 2016-2017 uptrend should the bears manage a close at these levels ahead of nonfarm payrolls tomorrow.  "Intraday we are unable to rule out this holding the initial test and would allow for failure on bounces to 1.3380. The market has recently failed at the 1.3579 2014-2017 downtrend and is viewed negatively," explained analysts at Commerzbank.