Lloyds Share Price Forecast: Does the Rally Have More Room?

The Lloyds share price is in a tight range as investors continue to focus on the outlook of the US economy and the bank’s plan to become a landlord. The LLOY shares are trading at 40.96p, which is a few points below the year-to-date high of 42.23.

What happened: The UK economy has done relatively well in the past few months as evidenced by the recent jobs numbers. According to the ONS, the unemployment rate declined to 5.0% in January even as the government announced a new lockdown. 

However, data released today show that the country’s inflation is still mild. The average consumer prices dropped from 0.7% to 0.4% in February. Still, there are limited chances that the Bank of England (BOE) will implement negative interest rates in the near term. This has helped bolster the Lloyds share price. 

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Meanwhile, the stock is reacting to recent news that the bank is considering becoming a major landlord in the UK. According to the FT, the bank is considering buying and renting out new and existing homes across the country. It aims to achieve all this by the end of the year. The goal is to diversify its income in a period of low interest rates. 

However, it could also mean that the bank’s returns to shareholders will be relatively minimal. Still, returns could be great since the country has a high housing shortfall. In a note, an analyst said:

“It would make a lot of sense for banks to try and tap into that, and try to build an ecosystem and one-stop solution around that. There’s a huge cross-selling opportunity given the level of household spend.”

Lloyds share price forecast

A look at the daily chart shows that the Lloyds stock has risen by 75% from its lowest level in September last year. At the current price, the stock is trading at the highest level on November 9. It has also formed a small ascending channel, which is a signal that the upward momentum is fading. Therefore, while the stock will keep rising, there is also a possibility of a pullback in the near term. If this happens, the next key level to watch is 38p.

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LLOY chart

Lloyds share price

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