Pound sterling holds onto gains versus euro as Bank of Italy Governor Iganzio Visco hints at ECB rate cut

Also weighing on the euro are today's poor economic releases out of the Eurozone.

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Bank of Italy Governor sinks the euro

"A relatively quiet session for the EUR/USD turned into a turbulent tumble after Bank of Italy Governor Iganzio Visco suggested that the ECB may be ready to cut rates again in order to stimulate the economy in moribund Europe. Mr. Visco, who is also a member of the European Central Bank's Governing Council, said that lower sovereign bond yields have failed to translate into gains for the real economy and stated that the ECB "stands ready to intervene again" if new information suggests action is necessary," says Boris Schlossberg at BK Asset Management.

His comments had an immediate impact on the EUR-USD in particular with the pair falling to a low of 1.2975 before finding some support.

"The euro has been remarkably robust over the past several days rising through the key 1.3000 level primarily on some profit taking in dollars longs, but today's rhetoric by Mr. Visco suggests that the pair may find further gains much hard to come by," says Schlossberg.

The pound sterling has meanwhile been aided by the latest monetary data out of the Bank of England, see our rolling coverage on the matter.

Visco's comments on monetary policy suggest that ECB officials remain deeply concerned about the state of economic activity in Europe and are actively looking for way to stimulate demand.

Elsewhere, todays weak Retail Sales data out of Germany which printed at -0.4% versus 0.3% eyed is just the latest data point to suggest that growth is sluggish.

"The problems are most acute in the EZ periphery economies with Italian monthly unemployment rate rising to 12.0% from 11.6% expected," notes Schlossberg.

There is no doubt that Italian officials are feeling tremendous political pressure and today's comments by Mr. Visco - very unusual for an ECB official given the central bank's official policy of never pre-committing on rates - may be an attempt to prod the ECB council to assume a more accommodative stance.