Introduction Over the years, international trade began with countries engaging cross border economies. Exporting and importing are common practices and have influenced the economies of different markets in different countries. Scholars have engaged in studies to understand the economic trends and foreign exchange. The rate of inflation and economic changes are some of the interests for the researchers. Reactions to economic change and foreign exchange dynamics have been given attention in their studies. Central banks in different countries have also kept record of the statistics to monitor the inflation rates and the impacts of the changes in the foreign exchange market. Scholars engage in the studies to obtain knowledge of the factors that affect the international markets and to get insights on how the tension caused by financial market tension impact the economic market. Currencies have different exchange rates depending on their economies. Their purchasing power can be influenced by inflation rates. This paper will discuss purchase power parity. Then it will provide information on the monthly inflation rate of USA and Europe and present their relationship Purchasing power parity Definition In accordance with Suranovic (1), Purchasing Power Parity is an approach for determining exchange rates of utilities involving different economies. The purchasing power for commodities is viewed as similar in different countries when the concept of Purchasing Power Parity is implemented. Importing and exporting activities influenced by price variations affects the exchange rate. The current account transactions of a state impact the foreign exchange. The cost of commodities between those countries will replicate the exchange rate. Diversity of inflation rates will be equal to the percentage increase or decrease of the rate of exchange. When there is no uniformity in the purchasing power of similar goods in different countries, the national statistical revenue and the GDP can be adjusted to reflect similarity in the entities. The value of a currency should be decreased to enable purchasing power parity to be obtained after the inflation in a country is increased. Law of One Price The concept of purchasing power has a basis in the law of one price. This implies that when additional costs for transaction and trade barriers are eliminated, similar products will go for the same price in different economies, when the cost is translated into the same currency. The law advocates for same price in diverse countries or markets where taxes and additional costs in transportation and management are removed. When there are diversities between two markets, buyers may obtain goods from one market whose cost is less and sell in the other market. When the same product is sold elsewhere for less, buyers obtain the product where the price is low. The demand for products in the market that has low prices will be increased and the prices will be raised. On the other hand, the supply of goods in the other market with high prices will increase and the price of the goods will be reduced. Integrated markets without additional taxes or costs will have matching prices for the commodity. When disparity arises, buyers will acquire t