Answer:
Correct option is (a)
Explanation:
As a country's interest rate rises, it's currency becomes attractive to foreign investors. As result, home currency appreciates against other currencies.
In this case, British interest rates have risen, so demand for Pound increases as foreign investors would want to invest in British rather than Germany or US. As such, Pound appreciates against Dollar.
As a result, German investors will buy fewer dollar denominated securities as they will invest in pound denominated securities. Euro is likely to depreciate against dollar as Pound appreciates against Dollar.
