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Brexit Struggling to Reach Deal

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Parliament’s cold reception to Prime Minister Theresa May’s Brexit deal at this time is an indication of United Kingdom’s indefinite exit from the European Union which was initially slated for March 29, 2019.

As May fought to advance her way further, Brussels has let Britain postpone its exit. However, there is less enthusiasm in the people and the parliament even for a twice-beaten, simplified version of May’s deal.  Lawmakers also have not approved a series of added revisions including a request to stop Brexit, causing further delays and the possibility of a second referendum.

Disconcerted investors have been trying to avoid trading the British pound, but the trading volumes’ subsequently tight shortage aggravates price swings.  It is now a question whether the Eurosceptic faction of Conservative Members of Parliament and Northern Ireland’s DUP, the party who is in charge of bolstering May’s administration, can ever be confident to support the deal before the new deadline of April 12.

If the agreement to withdraw manages to get through, the sterling in all probability will drop to US$1.35.  For now, though, an imminent alternative scenario is a chaotic one where no-deal departure endures.

Alternative markets are pessimistic.    The consequences investors are willing to face for a month of sterling protection –insurance against further retreat of sterling – is at an all-time high since the referendum vote in 2016.

In the interim, it has been a month since China, and the U.S. missed the mark and fell short on the initial deadline to negotiate a trade agreement.  The first personal consultations between the two nations are both “constructive” and “productive”; now China’s Vice Premier Liu He is expected to fly to Washington to finalize a trade deal.

Meanwhile, tariffs on $250 billion worth of Chinese goods are on the line, and that may impair not only China but other neighboring Asian countries that are associated through complicated supply chains.

Monday data showing China’s manufacturing industry’s resurgence in March, and for the first time in four months, is a sure indication that government measures to boost the economy is gradually gaining strength.  But new exports and domestic orders’ growth is insignificant, giving us a hint that the economy will still be in a difficult situation in the months ahead and will probably demand more policy aid before it normalizes.

In the hope that Beijing gives enough encouragement to compensate for the dawdling trade is helping ease and allay worn out spirits.  Asia’s Central bankers have started hinting at interest rate reduction, relieved that the Fed’s campaign to strengthen policy has come to an end. Activity data in prospect may show how promptly they need to do something.