The US dollar is trading with a heavier bias against the euro, sterling, and yen, but is firmer against the Antipodean currencies and many of the actively traded emerging market currencies.  This mixed performance is the story of the week. 

The US 2-10 yr yield curve is flattening further today with the two-year pushing above 1.70% for the first time since the financial crisis. The 10-year yield is slipping toward the middle of this week’s 2.32%-2.41% trading range.  

There are two big US stories being discussed today. The progress on US tax reform and news that the special prosecutor had subpoenaed documents from more than a dozen Trump campaign officials several weeks ago.      

The House of Representatives passed its version of tax reform yesterday.  The Republican majority in the Senate is narrower, and only a third face voters next year compared with the entire House. In its current form, it is difficult to see the current bill pass. It did pass the Senate Finance Committee late yesterday.  The bill will be debated by the entire Senate after the Thanksgiving break. There will be a dozen legislative sessions between Thanksgiving and the holiday break in December. 

The Joint Committee on Taxation, which does for taxes what the CBO does for budgets: official arbiter looked at the Senate plan. It found that the Senate’s plan, without including the repeal of the estate tax, leads to higher taxes for those households earning less than $75k a year. Note that the median household income in the US is around $55k. The JCT estimates that 65% of households will experience higher taxes, while 24% will get a cut. Oscar Wilde once quipped that,”There are only two tragedies in life, one is not getting what one wants, and the other is getting it.” The Senate does not seem to know which tragedy it is writing.