By Alun John and Brigid Riley

TOKYO/LONDON (Reuters) – The dollar slipped against most currencies on Thursday ahead of U.S. inflation data that will shape the Fed’s policy direction, although the prospect of higher energy costs pushed it to a one-month high against the yen.

The euro rose 0.48% to $1.1028, the pound gained 0.4% to $1.2771, and the yen was steady at 143.83 per dollar, having earlier softened to 144.14 per dollar, its weakest in a month.

However, the main scheduled event of the day – and indeed the week – the release of U.S. CPI for July is yet to come.

The data will go some way towards underscoring or disrupting markets’ current expectation that the Federal Reserve is finished with its tightening cycle.

Expectations are for headline inflation to pick up slightly to an annual 3.3%, while the core rate, which excludes the volatile food and energy segments, is forecast to rise 0.2% in July, for an annual gain of 4.8%.

“The market reckons it’s got a good handle on CPI. It thinks: ‘Yes the headline number will go up, but on base effects so the Fed won’t mind and the core number is probably going to go down towards the target, so everything’s going to be OK,'” said Jane Foley head of FX strategy at Rabobank.

“But even if the number comes out in line, there are a number of things for the market to be watching out for,” she said, pointing to recent volatility in the U.S. Treasury market and higher energy costs, which could filter through to inflation and cause central banks to keep hiking rates.

Oil is at multi-month peaks, and European benchmark gas prices hit a nearly two-month intraday high on Wednesday after news of possible strikes at Australian liquefied facilities, though retreated on Thursday on news of negotiations. [O/R][NG/EU]

“We’ve got euro/dollar back above $1.10 this morning, quite possibly because of energy because markets are thinking ‘oh does that mean the ECB will have to hike interest rates again?'” said Foley.

“Though you could argue it the other way given the euro zone recession risk if energy stays higher,” she added.

The impact of higher energy costs were also a factor in the softer yen, as resource-poor Japan is a major oil importer.

“The fact that energy prices have risen for almost seven weeks, that’s certainly weighed on the yen,” said Tony Sycamore, a market analyst at IG.

A break above 145 would open the way potentially to 148 “if we get the U.S. dollar flexing again after the CPI,” he said.

Elsewhere, edged further away from a one-month trough after the People’s Bank of China again set a stronger-than-expected mid-point guidance rate in a sign of unease at recent weakness. [CNY/]

That helped lift the Australian and New Zealand dollars from near two-month lows.

The dollar was down 0.14% against the to 7.216, and the , which has tended to follow the yuan closely this week, rose 0.56% to $0.6565, rebounding from Tuesday’s trough at $0.6497, the lowest level since June 1. [AUD/]

The Swiss franc, the best-performing G10 currency against the dollar this year, also firmed. The dollar was down 0.5% at 0.873 francs.