The sterling's ability to extend its broad-based gains hinges on whether UK central bankers show concern about the potential damage to exports and whether data in the coming weeks confirms the economic recovery is on track.
The pound rose this week to its highest level in 19 months against a basket of currencies weighted according to their relative importance for UK trade.
Traders are now expecting it to strengthen further, clawing back more of the ground it lost immediately after the financial crisis flared up in 2008.
At lot of it is the result of the resurfacing of the euro zone crisis.
With borrowing costs in Spain and Italy jumping during the past week or so and the euro coming under pressure, investors have been seeking alternatives to euro zone assets, notably sterling ones.
Having already hit a three-month high against the euro of 82.27 this week, many analysts believe the currency is on track to vault its 2012 peak and climb towards 80 pence per euro, levels not seen since the middle of 2010.
Its rate against the euro makes up around 50 percent of the Bank of England's trade-weighted index, hence that benchmark's jump.
Bank of England minutes on Wednesday could hamper the pound's ascent past these key levels, however if policymakers make any reference to its recent gains and the potential the strength might do to exports.
The Bank of England have always welcomed the weakness in sterling post-credit crisis, and part of the way in which they have envisaged quantitative easing (asset-buying by the bank) working has been through the exchange rate, said Steve Barrow, currency strategist at Standard Bank.
If the pound is riding higher and the Bank makes a reference to sterling strength it's not inconceivable that this could act as a spur for some profit-taking.
However, he said policymakers were unlikely to express great concerns because the exchange rate is only one of the factors that affect economic activity.
Any dip in sterling, which on Thursday hit a 19-month trade-weighted high of 82.4 and came within a whisker of the 2012 high of 82.22 pence, would, therefore, only be temporary.
Euro zone debt concerns have not been the only reason that investors have been buying sterling. The balance of economic data in recent months has been stronger in the UK than in the euro zone.
Most recently, Britain's biggest department store chain John Lewis
But analysts say the pound's strong gains pose a risk to exports and the government's aim to rebalance the economy.
Data on Thursday showed a wider-than-expected UK trade deficit in February and more such evidence would risk puncturing sterling's buoyancy.
Economic reports next week include jobs figures on Wednesday and retail sales on Friday and also have the scope to deflate the market's optimism about the pound.
So too could the links between Britain and the euro zone
Valentin Marinov, currency strategist at Citi, said in a note to clients that sterling gains could be limited by the close ties between the UK and the euro zone economies and the huge exposure of the UK banking sector to the recession hit part of the euro zone.
However, most analysts believe the troubles facing the euro zone will leave sterling's gradual ascent intact as investors look to diversify out of euro zone assets.
This is a continuation of a theme we've seen since the middle of last year as wealth holders and managers of money with exposure to the euro zone have been putting their money to work in other currencies, including the pound, said Michael Derks, currency strategist at FXPro.
This is ongoing and should pull the euro down towards the 80 level, he said.
(Editing by Jeremy Gaunt.)