* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
LONDON, May 21 (Reuters) - The pound fell to a five-month low on Monday as the dollar surged and investors prepared for data that could determine whether the Bank of England raises interest rates this year.
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.
Sterling slumped half a percent to $1.3412, its lowest since Dec. 28, as the dollar soared on reports the U.S was putting its trade war with China “on hold”.
Important data on the British economy due this week, including inflation and gross domestic product, will be scrutinised by investors to gauge whether the BoE might tighten monetary policy as early as August.
“Markets have lost faith and conviction over BoE policy tightening, we now place a strong emphasis on UK data to guide market policy expectations,” said ING FX analyst Viraj Patel. “Buckle up, it’s going to be a bumpy ride for the pound this week.”
Risks around the sort of post-divorce relationship Britain can agree with the EU weighed on the pound last week. But the biggest reason for sterling’s fall has been a drastic shift in market expectations of when the BoE will raise rates.
Recent weak economic data mean markets are now not even pricing in a full 25-basis-point hike by the end of 2018. They had expected two 25 bp rises this year.
Concerns over Brexit also continue to dog the pound.
Scottish First Minister Nicola Sturgeon said on Sunday she would consider another vote on independence for Scotland when the British government offers some certainty over Brexit .
Adding to the political uncertainty, Tory MPs reportedly are bracing themselves for a snap general election this autumn amid fears the Brexit deadlock will become insurmountable.
In notes to clients, analysts at CMC Markets and Commerzbank both predicted the pound would fall toward the $1.3300 level in the short term. (Reporting by Tom Finn, editing by Larry King)