Forex focus: a show of strength from sterling One month Three months 12 months Barclays Capital BNP Paribas RBC Capital Markets TD Securities The reason for sterling's strength could be placed at the door of decent economic data being trotted out as 2011 came to a close, much to the surprise of analysts and economists. As David Kerns, senior dealing manager at Moneycorp, explains: "For once, it was this positive news driving the pound forward, rather than negative stories emanating out from the eurozone or across the pond." Jeremy Cook, chief economist at currency broker World First, agrees. The run higher for the pound has been as a result of the recent run of good data and the continuing belief that the United Kingdom is a sensible 'safe haven' from the problems in the eurozone. It is now almost guaranteed that the UK economy will not see a fall in national output through the last three months of 2011. Whether it can be maintained is the million dollar question. Sterling started in a similar vein last year and was in fact the best performing currency in the G10 through the first quarter. It was unable to carry that forward however, as the eurozone crisis started to hammer confidence and the European Central Bank hiked interest rates. The signs look better this year, although we are not expecting the pound to go on a rampage through 2012. With the pound breaking through the psychological level of €1.20 to £1, the main difference between this year and last year is that it's likely to be sustainable rather than a short-lived surge. "Although the economic picture in the UK is not rosy, we have the advantage of an undervalued currency and the fact that the Government's cost of borrowing reduced sharply in 2011 to historic lows below two per cent," says Chris Towner, director of advisory services at HiFX. In fact, the UK Gilt was the best performing major government bond in 2011, rising by 17 per cent. Had you bought Gilts and McDonalds shares last year, you would have had a very good year. Who says boring doesn't earn you money! While our economy is not in great shape, we are not facing the mountain of problems that the eurozone is struggling to resolve. We've kept our triple-A credit rating on the world markets, which makes us a safer bet than the euro. Towner adds: "Investors are concerned about the sovereign debt crisis in Europe and the impact that this is going to have on growth going forward, especially since Merkel in Germany has made it very clear that there is not going to be any 'quick fix' to the issues." Sentiment towards the prospects of Greece leaving the eurozone has changed from the Armageddon scenario everyone was predicting last year when it was first mooted, into a more pragmatic shrug. If - and many think it's more likely when - it happens, Greece's exit may be more of a whimper than a bang. Nick Ryder of Smart Currency Exchange's round-up of analysts finds that many experts expect Greece to leave the euro by this time next year, and the most pessimistic of analysts feel there might not even be a euro by 2013. The debt repayments of the other PIIGS - Portugal, Ireland, Italy and Spain - are casting a longer shadow over the eurozone. Daniel Abrahams of MyCurrencyTransfer.com says: ""Whether the sterling surge continues will largely depend on Spanish and Italian debt auctions towards the end of the week. The outcome of this first pivotal test of 2012 will be a key litmus indicator of investor willingness to back the ailing eurozone sovereigns."" The US has also produced some positive news lately, particularly as employment figures were better than expected. "Last Friday's employment report surprised to the upside," says Alistair Cotton, corporate dealer at Currencies Direct, "and it is looking more likely that we are now in an uptrend in the US jobs market which is US dollar positive. With the US economy creating more jobs, the prospect of more quantitative easing any time soon is receding, which will also give the dollar a boost. If we do see the US economic picture improve over the coming months that should also translate into further strength for the other North American currency, the Canadian dollar. Canada will naturally benefit from an uplift in economic growth in America, but secondary effects involving renewed demand from emerging markets for its raw materials should help the loonie in the first half of the year. HiFX's Towner expects the pound to slide to around the $1.50 mark and adds "the Canadian dollar, although whippy, remains in a broad range in GBP/CAD pivoting 1.60." For sterling at the moment, when it comes to the exchange rates, it seems to be a case of you win some and you lose some.