In the opening European trading session on Monday, the GBP/USD currency pair pulled back sharply. It reduced its advance and dipped under the 1.3300 level. The market moved lower in quiet trading ahead of the holiday. Market traders were away from their desks to mark the May Day holiday. The lack of liquidity is likely to be a theme for the rest of the day which will add to the movement or volatility of this currency pair.
GBP/USD was well bid at the start of the session, showing early strength. As the day progressed, it struggled to maintain that positive movement. The pair’s jump tells us about the overall state of the market as most traders chose to remain on the sidelines leading to a lackluster session. Experts point out that light trading conditions tend to create higher volatility. This creates a challenging environment for currency pairs such as GBP/USD to develop a strong directional bias.
The May Day holiday, observed in many countries, has added to thin trading. With market participants evidently focused on holiday leave rather than trading, the mood has become much quieter amid a lack of active trading. GBP/USD has a hard time finding its footing. Everyone is super risk averse so people don’t want to make big moves in this type of environment.
Still, experts don’t expect the recent thin trading conditions to end anytime soon, well past May Day. Here’s how it might affect GBP/USD performance in the next few days. Investors need to be on the lookout. Even in low activity times, any surprise announcement or economic data release can lead to quick price swings.