Question: QUESTION 28 Using purchasing power parity to explain exchange rates; if the current spot FX rate for the EUR/GBP = 0.9034 and if inflation in

QUESTION 28

Using purchasing power parity to explain exchange rates; if the current spot FX rate for the EUR/GBP = 0.9034 and if inflation in the Euro zone is expected to be 1.22% (note this is not pa but the amount that prices are expected to rise over the quarter) over the next quarter and inflation in the UK is expected to be 0.5% for the same period, to what level is the spot EUR/GBP exchange rate expected to move over the quarter?

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