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Markets rallied in approval of Greece’s second bailout package last week. If I’m not mistaken, Pip Diddy talked about how the euro bounced 200 pips from its lows against the dollar when news about an agreement hit the airwaves.

As Europe’s debt woes faded into the background when concerns about the U.S. debt ceiling gained more steam, it seems like investors were able to pay more attention to economic reports from the region. Unfortunately for euro bulls, the digits that we saw weren’t really impressive, especially those that came from Germany. In fact, some naysayers think that euro zone’s biggest economy could be losing its mojo. Uh-oh…

This week we saw that consumer confidence in the country slumped in July. According to GfK, which is a market research company, Europe’s debt crisis was a big factor as to why its Consumer Climate index came in lower at 5.4 during the month from 5.5 in June.

German businesses also reported weaker-than-expected earnings reports. Hotshot engineering conglomerate Siemens announced that its profits for Q2 2011 fell 65% to 501 million EUR. Some of the head honchos in the company cited the strong euro as a reason for their losses.

Meanwhile, Volkswagen (Europe’s biggest car-maker) said that its preferred sales dropped by 5% after its chief executive expressed his concern that the debt crisis would hurt sales.

Germany in contrast

Germany’s manufacturing PMI report for July also came in more than two points lower than its reading in June at 52.1. Meanwhile, its services PMI showed that activity in the sector slowed when the index printed at 52.9 versus June’s 56.7 reading.

With all these reports painting a cloudy fundamental landscape for Europe’s biggest economy, a few market junkies think that ECB President Jean-Claude Trichet will speak with a more dovish tone in the next ECB press conference. If this turns out to be the case, we may just see more euro-selling in the coming week! Yikes!

But before you jump to that conclusion, you may want to know that it’s not all gloom-and-doom in Deutschland.

For instance, yesterday we saw that retail sales for June came in almost four times the forecast at 6.3%, erasing its -2.8% reading for May.

Then there was also the country’s unemployment change report which showed that the number of unemployed people amounted to 11,000 in July. Sure it was lower than what analysts had predicted at 15,000, but FYI, July marked the 25th consecutive month of declining unemployment.

And oh! It’s also worth noting that inflation rose to its three-month high after the CPI report printed a 0.4% uptick for July.

So what’s your take on this? Will signs of slowing growth from Germany hold back the ECB from being hawkish? Or will inflation pressure it to take more vigilance?