Suppose that international markets expect inflation to average 1.7% in germany for the foreseeable future, and U.S. inflation is expected to average 1.5%. Based on that information one should expect the dollar to:
Appreciate 3.2% per year
Depreciate 3.2% per year
Appreciate .2% per year
Depreciate .2% per year
Be unchanged since inflation is a national, not an international, phenomenon