LONDON, Feb 28 Reuters 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 Reserve39;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.

There is a tone of caution in the markets this morning ahead of the incoming highimpact U.S. data, which has guided sterling lower, said Kyle Chapman, FX markets analyst at Ballinger Co.

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

The pound was last at 1.2645 against the dollar, down 0.3 and on track for its biggest oneday 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.

Looking at the broader perspective, it39;s tight ranges as markets wait for the inflation data, said Danske Bank FX and rates strategist Mohamad AlSaraf.

Germany, France and Spain publish their inflation figures on Thursday before euro area inflation as whole…