If the European Central Bank increases European interest rates

Question

Quizplus · Accepted Answer

When the European Central Bank increases interest rates, European assets become more attractive, leading to an increased demand for euros to invest in these assets. This shifts the demand curve for euros rightward. At the same time, Europeans are less inclined to invest abroad, reducing the supply of euros to the foreign exchange market, which shifts the supply curve leftward.

If the European Central Bank Increases European Interest Rates