Strong recovery by pound / euro exchange rate as a 'rich' euro is finally sold-off
The pound euro exchange rate has recovered morning losses to register gains of 0.2 pct on a day-to-day basis at 14:14 in London. GBP/EUR is now at 1.1780. (Note that this is a spot market quote, your bank will add their own spread. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. More on this here.
The GBP-EUR exchange rate had started the day sharply in the red as the euro saw increased interest alongside a broad-based stock sell-off.
With equities recovering through the course of the day we have simultaneously seen the euro being sold off.
Euro looks very 'rich' to us at current levels say TD Securities
Has the euro become overvalued in recent times? Yes suggests Shaun Osborne at TD Securities who sees the recent sell-off as being justified:
"EUR-USD made yet another high overnight just shy of 1.34 before pulling back sharply. It’s worth pointing out that German- US 2 year spreads 
have narrowed alongside the rise in EURUSD over the past two weeks, but have made a turn since the beginning of this week. That may be a leading signal of the currency pair’s impending shift. These levels look very rich to us and we view them as solid selling opportunities."
Commodity currencies in recovery mode
Elsewhere, we note the commodity currencies are picking themselves up from recent inter-year lows.
Global macro developments were scarce overnight, but the FX majors—and markets broadly—continued the volatile price action we’ve seen over the last week.
The notion of less QE from the Fed adds volatility to markets, particularly as we approach the pivotal FOMC meeting next week.
Commodity currencies are rebounding further from the cycle lows earlier this week, with the AUD leading the charge.
The market will be focused on US data this morning for the next signal on the direction of the USD.
Are we witnessing a massive shift in currency market trends?
According to Camilla Sutton at Scotiabank we are currently witnessing some significant shifts in global currency market dynamics:
"Today’s FX markets shifts warn of a new trend developing—FX volatility continues to rise as massive deleveraging and repositioning force significant shifts in markets.
"From May 22 (the day of Fed Chair JEC testimony), the USD has been notably weak against the other majors of EUR, GBP, JPY (as well as CAD); and strong against most of Asia (ex‐Japan), Latam and carry sensitive currencies like AUD.
"This pattern likely reflects the unwinding of EM and carry trades flowing into the liquid and low beta majors (essentially Emerging Market to Developed Market flows).
"Today, the pattern has shifted to a broader USD weakness trend, with the majors as well as THB, SGD, MXN, AUD and NZD all gaining ground.
"We are tempted to argue that this reflects a shift from previous sessions; potentially a shift from the fears of Fed tapering towards the realisation that market pricing will create limits to what the Fed can do."