German PMI data came in mixed as service-sector activity reached a 3-month high, but factory-sector activity fell for the second consecutive month. Similarly, the Euro-zone service PMI gauge rose to a 5-month high in February, but factory-sector activity fell to a two-month low. Euro-zone PMI Composite index missed expectations and fell to 52.7 (two-month low). The Euro dipped as the news crossed the wires, but the true market mover was a set of disappointing German inflation data released earlier in session.
The Euro sold off aggressively against most of its major counterparts as traders considered the implication on monetary policy after a disappointing German PPI report. The inflation gauge showed that month-on-month growth fell 0.1 percent in January, missing expectations calling for a 0.2 percent increase. Already pressuring the Euro lower was a set of hawkish FOMC minutes released early in the session boosting speculation that QE3 will fully be wound down as early as September, thus boosting demand for the US Dollar.