* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
(Updates headlines, comments, adds graph)
By Joice Alves
LONDON, Sept 18 (Reuters) - Sterling got support on Friday
from data showing British shoppers kept increasing spending last
month, taking sales further above their pre-COVID-19 levels,
although the outlook for the pound remains bleak.
The currency was flat versus the euro at 0.9131 at 1001 GMT
, and up 0.1% against the dollar at $1.2984,
after falling to $1.2866 on Thursday when the Bank of England
said it was examining how it might cut interest rates below
British retail sales now stand 4.0% higher than before the
crisis. The sector has enjoyed a faster rebound than the rest of
the economy, helped by strong online demand.
But the prospect of a chaotic end to the Brexit transition
period in December if Britain fails to agree a trade deal with
the European Union continues to overhang sterling.
"The increased probability of no-deal Brexit makes negative
rates even more likely, in our view," said ING analysts.
The BoE kept its main stimulus programmes on hold this week,
as expected, and said that Britain's economy had performed
better than expected.
But highlighting risks relating to rising COVID-19 cases,
the unwinding of jobs protection schemes, and Brexit, the BoE
said it was ready to take further action.
Kit Juckes, head of FX strategy at Societe Generale, said
that with the pound already very close to record lows touched in
1976, "negative rates can take sterling to a new all-time low."
"Cutting rates to below zero in the wake of a decision to
leave the EU without a trade deal, would indeed seem reckless,"
ING analysts wrote in a note to clients that they expect
EUR/GBP to test 0.9300 again this month.
"We continue to see more downside to GBP as not enough risk
premia is priced into the currency."
(Reporting by Joice Alves; Editing by Catherine Evans and Hugh