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ELI5: What happens to the physical money when doing international transfers?

Imagine you deposit $1000 cash in the US into your bank account at bank A. Then you transfer the money to your partners account in Germany at bank B and your partner withdraws the equivalent amount of money in euros. 

What happens to the cash when sending money from Bank A to Bank B?
gpt
In the most simplistic terms. Your bank in the US will have a contract in place with a transferring bank in the US. They will do an electronic transfer to the Transferring US Bank. The transferring bank in the US with agree a transfer with a Transferring Bank in Germany and the Transferring bank in Germany will do a transfer to the Destination Bank. 

So in-country bank to bank transfers don't involve trucks driving around with bank notes and change for every transfer. The transfer is electronic and the bank will keep a electronic record of the total balance of transfers between them for all their client's transactions (in both directions) and will balance this out from time to time in a variety of methods. In the old days this used to be physically transferring gold between them. Now-a-days it is more likely to be bonds being transferred, but can be stocks, gold, options, property or balances held at other banks and also actual cash obviously.

International bank to bank is pretty much the same. The Transferring Banks will agree to buy/sell Euros for Dollars at a particular spot exchange rate. The books between those banks will get balanced from time to time but the immediate consequence for your individual transaction is that the German Transferring Bank will take an IOU from the US Transferring Bank.