Sterling tumbled to a two-month low against the dollar today after the UK economy slowed far more than expected in the first quarter of 2018, dashing expectations the Bank of England will raise interest rates in May. 

The pound fell as low as $1.3748 against the dollar, weaker by more than 1%, after data showed Britain's economy grew at its weakest pace since the fourth quarter of 2012. 

Against the euro, the pound dropped as much as 1% to 87.85 pence today. 

The scale of the economic slowdown may unsettle the Bank of England, which meets next week to consider whether to raise rates for only the second time since the 2008 financial crisis. 

Market expectations of a rate hike in May more than halved today to 20% from around 50% before the GDP data. 

The market is now pricing in less than one 25-basis-point rate move this year, instead of the two increases expected by many economists only a fortnight ago.

Today's slide marks a major reversal for the pound, which had been among the best performing major currencies in 2018 as investors loaded up on long positions. 

Just last week, expectations of higher rates lifted it to its highest level since the Brexit referendum in June 2016.

London's FTSE 100 index had rallied today as investors bet that a weaker pound would boost export-oriented companies. 

Some analysts said they expected the pound to fall further in the short term but that it might recover if business surveys for April show signs of bouncing back and the government clarifies its position on agreeing a post-Brexit trading relationship with the EU. 

Even before today's data, many economists began to feel the Bank of England might be getting cold feet about a rate rise to curb inflation, especially after Governor Mark Carney last week alluded to the possibility of postponing any hike. 

Sterling usually performs well in April thanks to seasonal dividend payments and capital inflows. But dashed hopes for higher rates have left it down 1.5% against the dollar this month.