Sterling remained near a 37-year low against the greenback at $1.140. Against the euro it was up 0.2% to €1.14.
Gold (GC=F) also declined 0.3% to $1,673 a troy ounce as focus shifts to the Federal Open Market Committee meeting that begins later today and ends Wednesday afternoon.
Markets are betting on Threadneedle Street to raise rates by another 50 basis points – or even 75 – when it meets on Friday.
A 50 or 75bp hike will take the key rate to 2.25% or 2.50% respectively from the current 1.75%.
"The probability data and forward curve of market expectations for Bank of England (BoE) interest rates changes by the second," said Russ Mould, investment director at AJ Bell. "Right now the market is pricing in a 12% chance of a 0.50% rise and 88% chance of a 0.75%."
Consumer price index (CPI) inflation unexpectedly fell to 9.9% in the 12 months to August from 10.1% the month before, according to the Office for National Statistics (ONS).
Despite inflation running at nearly five times of its 2% target, the BoE's Monetary Policy Committee has to balance its tightening policy as recession looms.
According to Michael Hewson, chief market analyst at CMC Markets, the Bank could be pushed to hike rates by 75bp by a more hawkish Federal Reserve and to support a weakening pound.
Fed chair Jerome Powell and the FOMC are expected to pursue an aggressive path as US CPI rose 8.3% in August from the same month a year ago.
Hewson said: "The rise in core prices could be more of a concern for the Bank of England given that they edged higher to 6.3%, which could shift their focus to be more aggressive in the short term, if only to match the Fed and help to underpin the pound.
"Further sterling weakness against the backdrop of a more aggressive Fed could force a move by 75bps and would also give them the added flexibility to go slower heading into year end."
Watch: How does inflation affect interest rates?