Barclays Research adopts a bearish bias on GBP going into UK local elections in May.

"UK political risks have resurfaced with the latest twist of the Mandelson affair. For now Gilts are taking their cue from the decline in energy prices; that said, risks from a more-expansionary fiscal policy after the elections should weigh on the pound for some time. A modest re-widening of the GBP's fiscal premium closer to levels prevailing in November points to EURGBP trading closer to 0.88 in the near term," Barclays notes.

"On a more-positive note, the government appears much keener on a more meaningful pivot towards the EU than previous pronouncements. The considerable procedural obstacles before such an intent can translate into actionable policies with tangible economic benefits, however, suggests this is more of a longer-term consideration. The planned UK-EU summit in late June or early July could be the first signpost in that process, should it materialize," Barclays adds.