The Bundesbank research division found that although the European Central Bank (ECB) did not intend to influence the euro exchange rate indirectly policy changes and announcements from the ECB had a significant influence on the currency.
The ECB is currently in a difficult position to control the exchange rate of the Euro against other currencies. This control is very necessary to avoid any accusation of manipulating the exchange rate as voiced by U.S. President Donald Trump in recent years.
Four Bundesbank study findings published on Monday show that the ECB's influence on the exchange rate, including against the US dollar, has been significant and has increased since the financial crisis.
One study found that the effect of the ECB was strongest when the ECB lowered its long-term interest rates. The decline is expected to depreciate against the euro by 0.7% against other currencies.
Bundesbank recommends that these considerations be taken into account as the ECB provides information on monetary policy.
