NEW YORK ( TheStreet) -- The eurozone proved unable to escape the weak global growth trend, as the region contracted for its sixth straight quarter Wednesday.Germany was the lone bright spot, but even that country failed to provide positive momentum to the region. The pair below is of CurrencyShares Euro Currency Trust ( FXE) over DB USD Index Bullish ( UUP). This is, in essence, a tale of diverging central banks. The Federal Reserve has been a major proponent of quantitative easing and loose policy for the past few years, providing liquidity and boosting investor sentiment. As sentiment has risen, the economy has gradually turned up. Now the talk is how the Federal Reserve is going to exit their continuing rounds of liquidity injections.
In Europe, the economic picture remains gloomy. European markets are sensitive to economic releases, and central bankers are willing to cut rates if the picture continues to worsen. The chart below highlights the weakness of the euro over the past few months. As the European Central Bank approaches more cuts and the Fed devises an exit strategy, the currencies continue to diverge. The euro is hitting yearly lows, and continued economic weakness from the region could mean falling to even lower levels.
Fitch upgraded Greece's credit rating on Wednesday, which led to a rally in Greek sovereign debt. They cited the reduced risk that Greece will be forced to exit the currency bloc, and although weakness pervades the region, there is a hint of stability that remains. This stability and continued rounds of liquidity should hopefully push sentiment higher, even if economic data take longer to improve.