Question: EPL Co. is a MNC based in United Kingdom. EPL specializes in the production of footballs, which are exported from the United Kingdom to the

EPL Co. is a MNC based in United Kingdom. EPL specializes in the production of footballs, which are exported from the United Kingdom to the United States. EPL invoices the exports in US dollar and converts the dollars to UK pounds when they are received. EPL believes that the value of the dollar in pounds is very sensitive to economic conditions in the United Kingdom and United States. EPL is considering the following information:

(iii) If the US Federal Reserve is expected to intervene in the foreign exchange market to strengthen the value of its currency, and Bank of England takes no action. Using the information provided, will EPL expect the US dollar to appreciate or depreciate in the future? (Assume that firms in US and UK sell goods that can serve as substitutes for each other) Explain.

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