Update: While this flyer is out in the wild, it does not confirm that it is actually happening. Microsoft has yet to make any announcements regarding the supposed cut. This article has been edited to reflect that.
According to Dutch retailer Bart Smit, the rumored price cut of the Euro Xbox 360 is happening. As previously speculated the Xbox 360 Elite has dropped from 549.95€ to 399.95€ , the Pro console (which includes Viva Pinata and Forza Motorsport 2) was lowered from 399.95€ to 299.95€ while the Arcade bundle is down from 279.95€ to 199.95€.
At 199.95€ the Xbox 360 Arcade would become the cheapest console of this generation in Europe, edging out the Nintendo Wii which retails for 249.95€. The Microsoft camp has stated that the key to better sales in 2008 is the European market, where Microsoft is forced to fend off the strong PlayStation brand awareness and the popularity of the Nintendo Wii. However, considering Xbox 360's popularity in the Western market we don't recommend North American buyers begin holding their breath for a price-drop just yet.
[Thanks, Sander D. Via WackaB]
Microsoft has officially announced that Canada will also be receiving 360 price cut in line with the cut 
If you didn't already know, today Sony announced that they've trimmed the fat on their Playsation 3 by dropping the price by $100. Surprising isn't it? Now the obvious question is whether Microsoft will retaliate with a price cut of their own or keep things the way they are. Industry analyst Michael Pachter thinks a price cut will happen and has gone on record to say that Microsoft will announce a Xbox 360 price drop sometime during E3. How Mr. Pachter sees it is that they'll knock of $50 from the Core and Premium and take $80 off the Elite making the price points $249, $349 and $399. This is of course entirely possible seeing that Sony is stepping on Microsoft's price point territory. Also, we're thinking a price cut is overdue seeing that the console has been out for nearly two years at the same price. We'll just have to wait until tomorrow night to see what surprises Microsoft has up their sleeves and if our 360 will get a fat trimming too.
In an interview with Bloomberg, Peter Moore and others discuss the Xbox 360 demographic, how they want to target moms and their kids, and hint at a possible 360 price cut. "If we don't make that move, make it early and expand our demographic, we will wind up in the same place as with Xbox 1" Moore says, and what better way to move more consoles than with a price cut. Director of Xbox product management David Hufford reinforces this thinking by stating that "we (Microsoft) are well aware that the sweet spot of the market is really 199 bucks" and that "when mom walks into the store and sees she can get a console with a game for $250, she sees it as a $300 value". It really sounds like Microsoft gets it.
For those of you wondering if the Xbox 360 will have a price drop coming down the pipeline, our good friend Steve Ballmer has some words of wisdom. "I think every console in the world has had a price decrease sometime in the first few years. I don't know whether we'll have a price decrease in the first few years, and I don't want to comment on that, but I will highlight for you that every console has had a price decrease in the first few years."
Here's an article in the Seattle Post Intelligencer telling the mainstream audience what we have already come to accept: Thanks to the PS3's lofty price tag, a price cut for the Xbox 360 is a long way off.
