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The spot FX rate is 1.24 $/ today. At time 0 the oneyear interest rate for euros is 5% and for USD is 3%. The

The spot FX rate is 1.24 $/ today. At time 0 the oneyear interest rate for euros is 5% and for USD is 3%. The expected spot FX rate a year from now is 1.22 $/. The USD interest rate unexpectedly drops to 2.5%, but there is no change in inflation expectation. What will be the new spot FX rate under the UIRP condition?

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