May 23, 2018 / 8:12 AM / a year ago

Sterling falls ahead of key inflation data

* Graphic: World FX rates in 2018

* Graphic: Trade-weighted sterling since Brexit vote

LONDON, May 23 (Reuters) - Sterling fell to a fresh five-month low on Wednesday as investors awaited key inflation data that could help decide if the Bank of England raises interest rates this year.

Sterling slumped half a percent to $1.3372, its lowest since Dec. 27, before trimming some of its losses.

A broad rally by the dollar and dwindling expectations that interest rates will rise have caused what had been one of the best-performing major currencies to give up all its 2018 gains.

BoE policymaker Gertjan Vlieghe told the Treasury Committee of parliament on Tuesday that policy rates are set to rise 25 to 50 basis points every year over three years, a comment initially interpreted by markets as supportive for the pound.

But recent weak economic data means markets are now not even pricing in a full 25-basis-point hike by the end of 2018.

The inflation data due out at GMT 0830 will be scrutinised by investors to gauge whether the BoE might tighten monetary policy as early as August.

Concerns over Brexit meanwhile continue to hurt the pound.

Foreign minister Boris Johnson said Britain must ditch the European Union’s tariff rules as quickly as possible and run its own trade policy, Bloomberg reported on Tuesday. (Reporting by Tom Finn Editing by Catherine Evans)

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