The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5905 level and was supported around the $1.5675 level. The common currency rocketed to a new lifetime high following another bout of unprecedented activity from the Federal Reserve. The Fed reduced its discount rate to 3.25% from 3.5% and availed the discount window to firms other than depository institutions. The March federal funds futures contract is now implying about a 115% chance the Fed will reduce its federal funds target rate to 2% from 3% after tomorrow’s Federal Open Market Committee meeting, and about a 92% chance they’ll take it lower to 1.75%. The Fed also provided immediate approval to JPMorgan Chase’s purchase of Bear Stearns in an all-stock deal that values the troubled investment bank at 1% of what it was trading at just sixteen days ago. The Fed also announced it was availing US$ 30 billion to cover Bear Stearns’s less liquid assets. The Fed’s creation this weekend of a Primary Dealer Credit Facility will allow the Fed’s primary dealers to engage in overnight lending with a range of collateral including mortgage-backed securities. Some market-watchers are suggesting the U.S. economy is one or two bank failures away from the type of widespread contagion that enveloped the country in the late 1920s and early 1930s during the U.S. Depression. Traders are also paying very close attention to the heightened risk of a concerted global monetary intervention to slow the depreciation of the beleaguered U.S. dollar. Conspiracy theorists were wagging their tongues today when it was reported that European Central Bank officials Noyer and Weber cancelled speeches today, citing personal reasons. Data released in the U.S. today saw February industrial production fall 0.5% with capacity utilization printing at 80.9% - the lowest level since November 2005. Also, February’s Treasury International Capital flows data revealed that foreign investors significantly trimmed their holdings of U.S. securities in January, revealing a net outflow of long-term securities. Monthly net purchases by overseas investors were only US$ 37.4 billion, down from December’s print of US$ 72.7 billion, while net foreign purchases of long-term securities were –US$ 19.2 billion. Additionally, the March Empire State manufacturing index fell to -22.23, much worse than expected, while the Q4 current account deficit narrowed to US$ 172.9 billion from a revised $177.4 billion in Q3, the lowest quarterly account deficit since Q3 2005. Traders are also paying close attention to media reports that Goldman Sachs will announce up to US$ 3 billion in write-downs this week. In eurozone news, European Central Bank member Liebscher said Everything must be done to avoid exaggerated exchange rate fluctuations. In contrast, ECB’s Liikanen hawkishly said the ECB will work to preserve price stability. Data released in the eurozone today saw Q4 employment up 0.2% q/q and 1.7% y/y. Euro bids are cited around the US$ 1.5610 level.