Lloyds shares have had a terrible start to 2024. The banking group started the year at 48p but quickly sank to trade at 42p as the interest rate malaise rocked financials.
General uncertainty around the timing of the first interest rate cuts will drive day-to-day trade in UK banks in the first quarter of 2024 as investors attempt to translate economic data into monetary policy predictions.
Importantly for the Lloyds share price, we are unlikely to see any major changes in the underlying economic fundamentals before Lloyds report full-year results on 22nd February.
The Bank of England will decide on their first interest rate decision of 2024 on 1st February and is widely expected to leave rates on hold.
The current trading range between 40p – 50p will likely be held until a material change in the macroeconomic environment, at which point these key psychological levels will be tested.
With the Lloyds share price trading beneath the 200-day moving average at 44.5p, the stock is set to trade with bearish bias in the near-term, with traders looking to sell into rallies.
The 42p level was held in mid-January after Lloyds built support in the area during November. This represents a critical technical level for shares because if it’s broken with any vigour, the 40p level will be in the sights of the bears.
Should a break below 42p/40p coincide with adverse developments in the real economy, Lloyds shares could well start Q2 2024 in the 30s.
The upside scenario and a retest of 50p is likely to be driven by perceptions of a ‘soft-landing’ in the UK economy that sees interest rates fall without significant disruption in the UK economy. The UK jobs market should be watched closely by Lloyds investors.
