The FTSE 100 Index crashed on the worse than expected UK Q3 GDP data that came in at minus 0.5%, the consensus forecast was for 0.2% and the Market Oracle forecast was for a 0.3% contraction of Gross Domestic Product.

Yesterdays analysis - UK Economic Crash Follows Housing, Stocks and Sterling Over the Cliff, pointed out the key factors involved and consequences of a sharp drop in GDP. Apart from the 250 point slump in the FTSE to 3800, the Pound also crashed to below £/$1.60 to £/$1.56. The break below £/$1.60 support suggests the next target is now £/$1.50.

The bad economic data confirms the Market Oracle forecast for deep interest rate cuts from 5% to the target rate of 3.25% by September 2009, with the next scheduled cut of 0.5% at Novembers MPC meeting. Given the speed of crash being observed in the economy, If anything this suggests that interest rates could now be cut to below 3%, hence the collapse in sterling.

By Nadeem Walayat
http://www.marketoracle.co.uk

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

Comments

jonathan davis
26 Oct 08, 08:47

house price forecast

For months you've said you would update your 08/07 forecast 12 months later. Where is it?

You were right about $ at 90 or so.

Nadeem_Walayat
26 Oct 08, 10:37

Housing Market forecast

And crude oil... from $146 to $80 in 3 to 6 months

And UK interest rates...

Though gold is not fairing so well...

It literally takes a week to generate reliable forecasts for economic indicators such as interest rates, GDP and housing market, therefore if I turn my attention to the UK housing market it would mean I would be posting less analysis on other more urgent trading markets.

In that regard the next analysis (today) will be an update on the US Dollar.

Housing is near the top of my list, but I am also getting calls to update crude oil and gold as well.

Best,

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