What the US and Denmark had in common this week and what it means for global financial markets
|Denmark and US adopt expansionary fiscal policies late in the economic cycle...
Normally the week ahead of Christmas is characterised by holiday peace setting in over politics and financial markets alike. At this time, government budget deals for the next year are typically safely sealed and investors have closed their positions awaiting the new investment year. However, this year, two countries, Denmark and the US, stood out as their politicians frantically scrambled to get fiscal packages through their parliaments.
In the US, the Republican Party achieved a major political boost by getting tax reform approved by both chambers of congress. The tax reform, costing an estimated USD1,500trn over the next 10 years, lowers corporate income tax from 31% to 21% and cuts the top marginal personal income tax rate from 39.6% to 37.0% while offering incentives for US companies to repatriate foreign income.
In Denmark, the Danish government managed to find agreement on a new budget for 2017. Similarly to the US republican party, the Danish government also attempted to push through tax cuts but failed in the end due to a lack of parliamentary support but plans to make another attempt to get the reform through in January.
So, apart from the political drama, what did these events have in common in the two countries? Well, the US tax reform and the Danish budget mean that fiscal policies in both countries will be expansionary next year (in Denmark, admittedly on a rather limited scale). Admittedly, other countries, such as Germany, Sweden and Estonia, may also be in such a situation (judging from IMF WEO data).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.