Lloyds share price crashed to the lowest level since September 14 as the outlook for the UK economy dimmed. The stock plummeted to a low of 46.22p, which was much lower than last week’s high of 50p. Other UK bank stocks like Barclays, NatWest, Standard Chartered, and HSBC also continued plummeting.
Barometer for the UK economy
Lloyds Bank is often seen as a barometer for the UK economy because of its strong market share in the retail and corporate sectors. The firm serves more than 26 million customers in the country and provides important services like mortgages and personal lending. Therefore, the company tends to do well when the UK economy is thriving and vice versa.
Now, the UK economy is in a tough position following last week’s mini-budget. In it, Kwasi Kwarteng said that the country will slash taxes broadly. In total, the government will cut taxes worth over 45 billion pounds. And during the weekend, he added that he was finding other ways to clash taxes in a bid to boost the country’s competitiveness.
These tax cuts will be positive for Lloyds and other banks. However, the concern is that they have led to a major crash of the British pound. On Monday, the GBP/USD price crashed to an all-time low as confidence in the UK economy worsened.
Therefore, there is a likelihood that the Bank of England will deliver a bigger rate hike in its next meeting or even before. Analysts are pricing in a 100 basis point rate hike, which will be positive for Lloyds and other UK lenders.
Lloyds share price forecast
The four-hour chart shows that the LLOY share price has been in a strong bearish trend in the past few days. It managed to crash below the important support level at 46.40p, which was the lowest level since September 15.
The stock has also moved below the 25-day and 50-day moving averages while the MACD formed a bearish divergence. Therefore, the shares will likely continue falling as sellers target the next key support level at 45p. A move above the resistance at 47p will invalidate the bearish view.
