I cannot deprecate terminal here just yet because people want to be able to configure keybindings to do both open in workspace root and current file's directory.

Allowing configuring cwd via keybindings would fix this:

{
  "key": "ctrl+shift+`",
  "command": "workbench.action.terminal.new",
  "args": {
    "cwd": "${fileDirname}"
  }
}

See https://twitter.com/borekb/status/1161229132627402752