The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3090 level and was capped around the $1.3335 level. Traders are expecting the European Central Bank to reduce its main interest rate by at least 50bps tomorrow with some traders calling for 75bs of easing. Three items from today could propel the ECB to cut more than 50bps. First, Standard & Poors followed through on its threat and downgraded the sovereign credit rating of Greece to A-/A-2. S&P had recently noted that it may reduce the ratings of Spain, Portugal, and Greece. Second, there is market talk that Ireland may seek financial support from the International Monetary Fund if its economy continues to weaken. Third, EMU-15 industrial production declined a record amount in November, off 1.6% m/m and 7.7% y/y – the deepest decline since 1990. Also, German November real machinery orders were off 30% y/y. The German government is now estimating the economy was off between 1.5% and 2.0% in Q4 2008. In U.S. news, December retail sales declined for a sixth consecutive month, off a worse-than-expected 2.7%. Other data saw December import prices decline 4.2% m/m and 16.2% q/q. Lower import prices will be a relief to Federal Reserve policymakers who must continue to provide ample liquidity through their expansionary monetary policy without engendering inflation. Fed Chairman Bernanke yesterday indicated he sees little risk of inflation in the near term. Richmond Federal Reserve President Lacker reported the Fed may have to withdraw some monetary stimulus quickly before credit markets are healed. Other data released in the U.S. today saw November business inventories fall at their steepest pace in seven years while sales were off a record 5.1%. Euro bids are cited around the US$ 1.3055 level.