The pound sterling has held on to gains against the U.S. dollar as eyes turn to the continent where the defeat of an Italian referendum on Sunday has raised fears about potential new fractures in European Monetary Union. The referendum Italian voters rejected on Sunday comes during the run-up to a European Central Bank meeting on Thursday, where the ECB will decide whether to continue its $1.8 trillion bond buying program that is set to expire in March.

December contracts for the GBP opened at 1.2736 on Tuesday and reached a midday high or 1.2777 on the CME Globex, with a low of 1.2680. March 2017 contracts hit a high of 1.2804, with a low of 1.2708.

A "no" vote to proposed changes to the Italian constitution that would have streamlined legislative processes led to the resignation of Italian Prime Minister Matteo Renzi, raising fears of a populist rise in Europe's fourth largest economy and third biggest in the EMU, a group of 19 countries that have the euro as their common currency.

The euro recovered from an early Monday sell-off, opening at 1.0767 on Tuesday and reaching a midday high or 1.07905 on the CME Globex, with a low of 1.0728.

Questions remain about continuing pressure on the euro as parity with the greenback continues to lurk.

Italy's referendum is likely to provide a opening for the Five Star Movement, a populist political party that wants to hold a referendum on Italy's membership in the EMU. Regarding the referendum, Patrick O'Donnell, investment manager at Aberdeen Asset Management said, "This result feeds into the broader uncertainty about Europe and will further add pressure" on the euro. For now, a referendum for an Italian euro exit is being described as non-binding.

A mixed message has already come from German finance minister Wolfgang Schauble who said  that "I don't think there is reason to talk about a euro crisis." Schauble, who has shown no love for the Club Med countries, also raised the specter of a "Grexit" when he stated that Greece "must reform or leave the eurozone."

Schauble told the German newspaper Bild am Sonntag that "Athens must finally implement the needed reforms" in the aftermath of bailouts, debt restructuring and other measures implemented between 2010 and 2015 to keep Greece from leaving EMU and printing Drachmas.

"If Greece wants to stay in the euro," he said, "there is no way around" meeting the demands of its creditors. Eurozone finance ministers are meeting in Brussels this week to discuss short-term measures to reduce Greek's debt burden.