'The Impact of US Monetary Policy Tools on Exchange Rates of Major European Currencies' : Tools or Games?

This study examines the impact of US monetary policy tools on the exchange rates of major European currencies. The study employs a secondary research design, analyzing existing literature from academic journals, online databases, and reports from central banks and international organizations. This study identifies key variables that influence the relationship between US monetary policy tools and exchange rates, including inflation expectations, risk premia, financial market conditions, and macroeconomic conditions in both the US and European economies.This study finds that changes in US monetary policy can significantly affect exchange rates through mechanisms such as inflation expectations and risk premia and that spillover effects of US monetary policy on other economies are a significant factor in managing exchange rates. This study concludes that the effectiveness of US monetary policy tools in managing exchange rates is subject to limitations such as time inconsistency, credibility issues, and the zero lower bound.Overall, this study contributes to the existing body of knowledge on the impact of US monetary policy on exchange rates of major European currencies and informs policymakers and other stakeholders about the potential impact of US monetary policy on exchange rates in the global economy