The euro notched modest gains vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4920 level and was supported around the $ 1.4830 level. The common currency came within 45 pips of establishing a new lifetime high, and chatter is focusing on when the pair will make a run at the psychologically-important US$ 1.5000 figure. Today’s U.S. economic data was ugly. First, December headline retail sales were off 0.4% and the ex-autos component was also off 0.4%, defying expectations for a slight pullback. November retail sales were also downwardly revised and this suggests final private demand fell markedly in Q4 2007. This pullback in consumption may end up being coincident with the beginning or near-inception of a recession in the U.S. economy. Second, December headline PPI was off 0.1% m/m and lower at +6.2% y/y with the core rate up +0.2% m/m and unchanged at 2.0% y/y. For all of 2007, wholesale inflation was up 6.3% and these data underscore the Fed’s problem: sluggish economic growth with elevated price pressures. Third, the January Empire State manufacturing index weakened to 9.0% from 9.8%. Fourth, November business inventories were up 0.4%. Market chatter is increasing regarding a possible intermeeting cut by the Federal Open Market Committee. Prior to the release of today’s data, the market was discounting about an 85% chance the FOMC will reduce rates by 75bps on 30 January and a 99% chance the federal funds rate will be 125bps lower from current levels after the FOMC meeting on 30 April. In eurozone news, the German ZEW economic expectations index fell to -41.6 from -37.2 in December. The German government today reported the economy expanded about 0.25% in Q4, down from Q3’s 0.7% q/q growth with total 2007 growth around 2.5%, down from 2.9% in 2006. Euro bids are cited around the US$ 1.4705/ 1.4625 levels.