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The dollar fell a touch on Thursday although moves were largely subdued ahead of a U.S. inflation report due later in the day, while sterling firmed on receding expectations for an August rate cut from the Bank of England (BoE).

The British pound rose to a one-month high of $1.28545 in early Asia trade, extending a 0.48% gain from the previous session after comments from BoE policymakers caused markets to scale back bets for an easing cycle to begin next month.

BoE Chief Economist Huw Pill on Wednesday said price pressures in Britain's economy were persistent and that the timing of a first rate cut was an "open question". His colleague Catherine Mann signalled she is unlikely to vote for an interest rate cut in August.

"Ahead of BoE's 1 August meeting, the Monetary Policy Committee (MPC) will have only one more set of data," ANZ analysts said in a note.

"One set of data is unlikely to be sufficient for the MPC to be able to gain confidence on the path of inflation, and the MPC may lean in favour of waiting for more data. Our view is as data improves over summer, the MPC will have greater confidence to cut rates in September."

In the broader market, the dollar was on the back foot, though currencies were mostly trading sideways as investors were hesitant to take on fresh positions ahead of the U.S. inflation report.

Against the greenback, the euro gained 0.04% to $1.0834, and the Aussie dollar rose 0.01% to $0.6754.

The dollar was little changed at 104.95 against a basket of currencies.

Expectations are for core inflation in the U.S. to have risen 0.2% on a monthly basis in June, putting the annual figure at 3.4%.

"The consensus is looking for a benign 0.2% lift in the core CPI. We think that may also be the case," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

"That outcome will obviously build confidence that the FOMC will be able to cut rates fairly soon, so I think a 0.2% (rise) may perhaps push the dollar a bit lower modestly if market pricing for a September (cut) increases."

Markets are now pricing in a more than 70% chance of a rate cut from the Federal Reserve in September, compared to a near-even chance a month ago, according to the CME FedWatch tool.

Fed Chair Jerome Powell said on Wednesday the U.S. central bank will make interest rate decisions "when and as" they are needed, pushing back on a suggestion that a September rate cut could be seen as a political act ahead of the fall presidential election.

Elsewhere, the New Zealand dollar rose 0.11% to $0.60885, nursing some of its losses from the previous session, when it fell 0.7% in the wake of the Reserve Bank of New Zealand's dovish tilt in its monetary policy statement.

The yen continued to be weighed down by stark interest rate differentials between the U.S. and Japan, and last stood at 161.54 per dollar, near a 38-year low.

Many Japanese private banks who met with the Bank of Japan (BOJ) on Tuesday called for the central bank to halve its monthly bond purchases by around 2026, two officials with direct knowledge of the deliberations told Reuters.

The BOJ is expected to lay out a plan on how to taper its huge bond buying at its upcoming policy meeting on July 30-31, as it works gradually towards policy normalisation.