Fundamental Analysis:
Barring June, when prices fell by 0.2%, buoyed consumer sentiment has resulted in a resilient house building market with volumes and revenues steadily increasing during the first half of the current year. However, nationwide prices in June fell by 0.2% against a forecasted increase of 
0.2%. A point of concern is that price growth has outpaced earnings, but the gap appears to be closing at the behest of lower savings rate but higher disposable incomes as wages have picked up. As per Office for National Statistics (ONS) real household income has grown 4.5% YoY and this rate has been the fastest since 2001. The saving’s ratio was nonetheless the lowest since mid-2008. Improved consumer demand has manifested with inflation expectation of 1.4% for June up from 1% in May and the expectation for the coming 5-10 years has risen as well to 2.7%. This leaves room for the much needed productivity increases which has lacked due attention as per Chartered Institute of Personnel and Development. Output per hour has been lower by 1% compared to early 2008 and this partially has been due to the fact that since the start of the recovery employment has risen faster than economic growth. Per hour output is still lower by at least 1% since early 2008, prior to the onset of recession. Further Britain’s overseas investments have yielded lower returns and the current account deficit stands near 26.5 billion pounds, which British Chamber of Commerce states should be a point of grave concern. Another potential issue worth pondering may be whether the housing market, a mainstay of Britain’s economy, could overheat and give way an untoward asset bubble. Surely this would have far reaching reverberations. Consumer market which has access to easy credit, as the central bank states, can be prone to a heavily driven buy-to-let properties which tends to be tested when interest rates are modulated upwards. While stricter rules on mortgage lending have enforce since last year, it would be monitor the impact of the confluence of available credit to the spread of buy-to-let activity which has the potential of overheating the housing market. Britain’s economic recovery is still highly dependent on household spending and while it has grown steadily and on a three month annualised basis it stands at 8.5%, highest since August 2005, and with a buoyed consumer confidence, it has to be ascertained whether the economy has enough buffer to withstand the eventual interest rate hikes the Bank of England has in mind. Given the fact that productivities are still low, but aggregate demand firm, it would still be worthwhile not to make haste yet wait for an opportune time to invest in the sterling which appears to be on an upward journey against many counterpart currencies as well as the greenback. Still the intermediate fundamental outlook is positive for the pound.
Technical Analysis:
It would be best to wait for an opportune time to go long sterling versus the dollar. On the daily chart the broader outlook is for a flat correction in its final wave “C,” however, there is still room for downward bias at it is possibly unfolding in a 5 wave diagonal pattern. The correction is still underway even though stochastic is oversold and MACD fairly depressed under the signal line. Two things to consider before going long the Sterling would be to firstly allow the 5 wave pattern to finish and this may come around at the 1.52 level which is a downward dart of ~ 200 basis points. Secondly this would allow a further build-up of downward momentum which would make a reversal of the trend i.e., favouring the sterling, imminent. This build up would be signified with the MACD going further into the negative zone on the 15 minute chart. On the daily chart the broader bias should remain up, albeit being choppy, as the 3rd wave motive wave formation unfolding. So it would be almost necessary to come aboard the ensuing motive wave ride!!!!!
