Cable might drop through 1.3000 if UK June CPI comes in softer than the 8.2% YY consensus forecast on Wednesday or ascend beyond 1.3150 if it is higher than expected for a fifth consecutive month.
A cooler than forecast UK CPI print would reduce the probability of a second consecutive 50 basis point rate rise from the Bank of England next month, while another hot number would get hawks squawking for another half-point hike.
The data is due at 0600 GMT, with 7.9% and 8.7% being the lowest and highest forecasts from the 40 Reuters poll respondents.
Markets currently see a 66% chance of the BoE raising rates by 50 bps to 5.5% on Aug. 3, with a 25 bps increase fully priced.
The dollar drifted near a 15-month low against its major peers, as investors awaited fresh catalysts to gauge for downside in the wake of last week's cooler-than-expected U.S. inflation.
Money markets have almost fully priced a 25-basis-point rate hike from the Fed at its policy meeting later this month but see rates coming down as early as December.
The euro hit a fresh 17-month peak of $1.1276 against the dollar in early European trade, with markets largely pricing a 25-bps hike from the European Central Bank when it announces policy on July 27.
However, the outlook for a further rate rise in September is unclear after euro zone economic activity slowed in June.
