The British pound slipped against the stronger dollar, its first daily drop against the U.S. currency in seven trading days, with investors avoiding risks before key inflation data that could determine when central banks begin easing policy.

Thursday brings the release of the U.S. personal consumption expenditures price index for January, the Federal Reserve's targeted measure of inflation, which investors were watching for clues on when it might cut interest rates.

Analysts expect the PCE price index to moderate to 2.4% on an annual basis and the core measure to slow to 2.8%.

More volatile currencies, such as the pound, are generally more sensitive to risk sentiment in markets, while the dollar tends to benefit from safe-haven demand when markets are cautious.

The pound was last at $1.2645 against the dollar, down 0.3% and on track for its biggest one-day drop in over three weeks.

The dollar index , which measures its performance against six other currencies, including the pound, was up 0.3% at 104.11.

Germany, France and Spain publish their inflation figures on Thursday before euro area inflation as whole is released on Friday.

But with little data out from Britain this week, some were already turning their attention to next week's Spring Budget, where some modest fiscal loosening before a possible election this year looks likely.

Source : Reuters