Lloyds Share Price Nosedived After Strong UK Inflation

Summary:

In this Lloyds share price forecast, we explain why the LLOY shares nosedived on Tuesday after the strong UK inflation data

The Lloyds share price retreated after the latest upbeat UK inflation data from the United Kingdom. The stock declined by more than 1.20% to 48p. Other British banks like Barclays, NatWest, and HSBC also turned lower. The FTSE 100 index also declined by more than 1%.

UK inflation: Consumer prices in the United Kingdom rose in April as the country’s economy continued recovery. According to the Office of National Statistics (ONS), the headline consumer price index rose by 1.5% in April after rising by 0.7% in the previous month. The core consumer price index that strips the volatile food and energy prices rsoe by 1.3% in April.

In theory, these numbers ought to be good for Lloyds Bank and other UK banks. This is because they imply that the Bank of England (BOE) will need to tighten policies faster than expected in a bid to avoid hyper inflation. Higher interest rates are usually positive for banks.

Therefore, the Lloyds share price is retreating possibly because of the fact that the economic recovery will push the government to pull the plug on its fiscal support measures. For one, data released yesterday showed that the unemployment rate declined to 4.8%. If the government pulls the plug and the Fed tightens, there is a possibility that the uptake of mortgages will slow.

Lloyds share price forecast

The daily chart shows that the Lloyds share price has been on a strong upward trend in the past few months. The shares are currently slightly below the 50% Fibonacci retracement level. They are also slightly above the 50-day and 25-day moving averages. Also, they are between the ascending channel that is shown in black.

Therefore, in the near term, the stock may keep rising as bulls target the next resistance at 50p. However, another drop below 45p will signal that there are still some sellers remaining.