- Summary:
- The BoE's letter to UK banks, asking about their preparedness for negative rates, seems to have pushed Lloyds share price lower as investors panic.
Several UK banking stocks fell yesterday after Reuters reported that the Bank of England had written to them asking how prepared they were for sub-zero rates. Lloyds share price fell 4.28% as the letter triggered speculation that the BoE was preparing a move into the uncharted waters of negative rates after much speculation in the past.
However, the BoE Chief has come out to say that the apex bank was not near debating the use of negative rates and that the letter was more focused on the technology preparedness of banks.
The BoE had in its September meeting statement, indicated it was looking into what a negative interest rate environment may portend for the UK economy. Several central banks are already implementing zero rates in a bid to drive banks to lend more. However, the Lloyds share price and those of other UK banks, already reeling from the dividend freeze implemented by the BoE earlier in the year, may have a hard time adjusting to the policy in a post-Brexit environment if indeed the BoE tows this line.
Lloyds share price is currently trading at 26.895, or 0.09% higher on the day as buyers struggle to counter the pushback effect of sellers who were able to beat back prices from today’s intraday highs at 27.295.
Technical Outlook for Lloyds
After the breakout from the channel last week, buying pressure on Lloyds share price has faltered as news of the BoE’s letter to the banks hit the markets. This drop found support at the broken channel border. Attempts at re-establishing the upside move this Wednesday met resistance at the 27.740 price level (30 July/4 September highs). The pushback moves from sellers have found support at the channel’s return line, which continues in its role reversal function as price support.
If price continues the decline, then a test of the 25.875 support could be on the way, as price re-enters the channel. 24.745 and 22.700 remain the barriers to price reaching the lower channel border.
On the flip side, if price can find sufficient buying momentum to break past the 27.470 resistance, then Lloyds share price could aim for the 29.765 resistance, with 31.250 and 32.950 remaining viable upside targets in the medium-term.
Lloyds Share Price Chart (daily)
