Lloyds share price outlook as hopes of a 0.50% BoE hike rises

Lloyds (LON: LLOY) share price pulled back on Friday this week as investors reacted to the latest UK retail sales numbers. The stock dropped to a low of 43.21p, which was lower than this week’s high of 44.40p. This price is about 20% below the highest level this year, meaning that it is in a bear market.

UK retail sales

Lloyds Bank is a leading British bank that is seen as a barometer of the country’s economy because of its operations. Unlike banks like Barclays and HSBC, Lloyds does not have any major international operations.

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In addition, Lloyds does not offer major investment banking and wealth management services. Instead, the bank most of its money from retail and business banking. Through Halifax, it is the biggest mortgage lender in the UK. 

Lloyds share price pulled back after the latest UK retail sales data. According to the Office of National Statistics (ONS), the country’s sales declined by -0.1% on a month-on-month basis. This drop led to an annualised decline of 5.8%. Excluding the volatile food and energy prices, core retail sales declined by 5.9%. 

These numbers came two days after the ONS published the latest UK consumer inflation data. The data revealed that the country’s inflation surged to a multi-decade high of 9.1% in June. Core inflation dropped to 5.7%.

Therefore, these numbers imply that the Bank of England (BoE) will go on with its extremely hawkish stance. The bank is expected to deliver a 0.50% rate hike, the biggest in a decade. Historically, banks like Lloyds generate more net interest income when interest rates hike.

The LLOY share price has pulled back as investors react to the latest US bank earnings. Most companies like JP Morgan, Wells Fargo, and Bank of America published weak results. 

Lloyds share price forecast

The daily chart shows that the LLOY stock price has been in a strong bearish trend in the past few months. The stock remains below the descending trendline that is shown in black. It has also formed a descending channel that is shown in black. 

The stock is trading at the 50-day and 25-day and moving averages and is slightly above the important support level at 43p. Therefore, there is a likelihood that the shares will keep falling as sellers target the lower side of the channel at about 40p. This will likely happen ahead of the bank’s earnings on July 27th.

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