LONDON - The pound lost a little ground against both the dollar and a resurgent euro on Wednesday, but the moves were fairly muted mirroring the calm across currency markets ahead of the possible storm following U.S. inflation data due the next day.

The euro climbed 0.33% against the pound to 88.65 pence trading near its three-month high of 88.77 pence hit at the end of December.

Sterling also lost 0.26% against the dollar at 1.2118.

"The economic outlook for the UK has already deteriorated substantially and is worse than that for the U.S. and the eurozone," said Georgette Boele, senior FX strategist at ABN Amro, in a Wednesday note.

ABN Amro expects more weakness for sterling versus the euro, also as a result of its expectation that the Bank of England will raise rates less than current market consensus.

They anticipate the British currency will do relatively well versus the dollar later in the year, because they expect more aggressive rate cuts from the U.S. Federal Reserve.

The dollar has been weakening sharply across the board in recent months on hopes that U.S. inflation is on the way down, which, along with some signs the U.S. economy is under pressure, have driven expectations the Fed is close to the end of its programme of interest rate hikes.

The pound hit a three-week high against the dollar of $1.2209 on Monday, though the euro hit a six-month high against the greenback the same day.

That narrative that U.S. inflation is on the way down will be underscored or challenged by U.S. inflation data released Thursday, which is keeping markets on edge.

(Reporting by Alun John; Editing by Shailesh Kuber)