The Lloyds (LON: LLOY) share price has been under pressure in the past two weeks as concerns about the Bank of England (BOE) remain. The stock is trading at 46.70p, which is about 6 points below its highest level this year.
Bank of England and Omicron virus
The Lloyds share price has declined as investors react to the latest Covid-19 pandemic wave in the United Kingdom. Recent numbers show that the number of cases has risen substantially in the past few weeks. Most of these new infections are of the Delta variant although the number of the Omicron variant is also growing at a relatively fast pace.
Therefore, the Boris Johnson administration has announced new restrictions known as Plan B. They will include more working from home, mask mandates, and vaccine passports.
To a large extent, these new rules will not have a major impact on Lloyds and other UK banks. The main impact will come from the BOE.
The BOE will hold its final meeting of the year next week. Before this new wave, most analysts were expecting the bank to start hiking interest rates and unwind the quantitative easing (QE) program.
Therefore, all indications are that the bank will not do any of these. Instead, it will likely embrace a wait and see approach. This will be a negative thing for banks since they make more money when interest rates are high.
Still, Lloyds Bank is attempting to diversify its business in a bid to reduce the overreliance of interest income. It intends to own about 10,000 homes by 2025 and about 50,000 by 2030. In addition to this, the bank, which has a new CEO, is expected to boost its investment in wealth management. This is one of the fastest-growing businesses in banking.
Lloyds share price forecast
On the daily chart, we see that the Lloyds share price has struggled lately as investors reflect on the new Covid situation in the UK. The stock is above the ascending trendline that is shown in black. It has also formed a cup and handle pattern and is above the 50-day moving average.
Therefore, there is a likelihood that the LLOY share price will have a bullish breakout in the coming weeks. Besides, the company has a 4 billion pound war chest and that the BOE will ultimately unwind its pandemic tools.