Is the ECB really reacting to the Federal Reserve’s announcements and to the risk of euro appreciation?

One possible interpretation of the continu ation of the highly expansionary monetary policy in the euro zone is that the ECB fears an appreciation of the euro, and that the Federal Reserve’s expansionary monetary policy forces it to keep zero or negative rates in place to stop the euro from appreciating . To find out whether this interpretation is correct, we introduce the euro’s exchange rate and the Fed Funds rate into the equation that explains the ECB’s repo rate setting. We find that the Fed Funds rate has a significant influence on the euro repo rate, with a coefficient of 0.3.