Lloyds share price (LON:LLOY) is now within touching distance of the highest levels since the beginning of the pandemic.
Indeed, at the time of writing, with shares trading at 50.56p, Lloyds shares are less 0.6p away from 51.11p and the highest level closest price of 2021.
The Lloyds share price was up over 1% in early trading on Wednesday as investors began to once more price in the impact of higher interest rates on the profitability of UK banking shares.
We wrote previously how the Bank of England bottling a rate hike at their last meeting would impact the Net Interest Margin of UK banks, including Lloyds.
However, with the latest instalment of inflation data and strong UK employment data, it is now very difficult to see how the Bank of England can’t hike rates at their next meeting in December.
On Tuesday, we received the latest insights into the health of the UK jobs markets which created just over 160K jobs in October.
One of the main reasons why the Bank of England didn’t hike at their last meeting was to allow time to gain further information on the health of the UK jobs market. This instalment of data showed amazing resilience in the labor market and the market began to immediately price in higher rates with GBP rising against major currencies.
Lloyds share ticked marginally higher on the jobs data but really jumped after the UK released the highest inflation data for 10 years with a CPI read of 4.2% in October.
“Inflation roared ahead in October, hitting its highest rate in a decade, and raising the risk that the Bank of England will step into the inflation fight and show its teeth,” said Sarah Coles, personal finance analyst, Hargreaves Lansdown.
Banks traditional enjoy higher profit margins in times higher rates and UK focused Banks Lloyds, Barclays and Natwest Group were among the FTSE 100’s top risers on Wednesday.
Investors will also be watching the drivers of inflation and the impact on household spending. While higher rates can help banking profits, households facing financial strain can undo much of the upside for banks.
Lloyds share price
Lloyds shares are up 39% in 2021 and one would think if we see the BoE deliver a rate hike, Lloyds shares will move to 2021 highs above 51.11p, if they don’t do that in the run up to the next interest rate decision.
In days prior to the pandemic’s first lockdown, Lloyds had a close of 58.03p on 13th February 2021 and this level will now be eyed by investors looking for the next major technical levels in Lloyds share price.