LONDON  - The dollar slipped against the euro on Thursday ahead of key earnings news from US banks and American housing data. In morning deals, the European single currency rose to 1.5863, from 1.5821 in New York late on Wednesday. The euro had struck a historic peak of $1.6038 on Tuesday, owing to worries about problems in the US financial system. That beat the previous high of 1.6019 set on April 22. Against the Japanese currency on Thursday, the dollar climbed to 105.28 yen from 105.12. "The dollar's overnight rally was limited as markets are cautious ahead of more banking results and have priced in that they will be negative," said Hideaki Inoue, chief foreign exchange manager at Mitsubishi UFJ Trust and Banking Corp. Major US investment banks JPMorgan and Merrill Lynch are set to reveal their balance sheets on Thursday. Citigroup, which has been hit hard by the subprime loan crisis, reports earnings on Friday. The dollar had firmed against other major currencies on Wednesday on falling oil prices and a surge in US shares triggered by a better-than-expected second quarter earnings reports by Wells Fargo and chip-maker Intel, traders said. The US unit was also supported by speculation that the Federal Reserve may be forced to raise interest rates after a jump in consumer inflation. "Inflation is currently too high," Fed chairman Ben Bernanke said in a second day of testimony to Congress, speaking after consumer prices rose 1.1 percent in June from May for an annual pace of 5.0 percent. The monthly jump in the consumer price index was the sharpest since June 1982, while a 0.3 percent rise in core CPI excluding energy and food was the strongest since January. "US data shows no let up in the stagflation scenario, with both producer and consumer prices spiking higher, while consumption softens and manufacturing production stagnates," said Commerzbank analyst Antje Praefcke. Thursday's "US data are unlikely to show a different picture, with the huge housing inventory market pointing to ongoing weakness for months to come," Praefcke added. Stagflation is the combination of rising prices, which forces central banks to keep interest rates high, and slowing growth. The euro had fallen from its all-time high against the dollar reached earlier this week on mounting worries over a cooling European economy, dealers said. "Currently, the overall European economy is doing better than the US economy, but there is no doubt that Europe will worsen. It's only a matter of time that markets will shift their focus to that," said Inoue of Mitsubishi. In early London trading on Thursday, the euro changed hands at 1.5863 dollars against 1.5821 late on Wednesday, at 166.97 yen (166.32), 0.7928 pounds (0.7914) and 1.6126 Swiss francs (1.6102). The dollar stood at 105.28 yen (105.12) and 1.0165 Swiss francs (1.0176). The pound was at 2.0008 dollars (1.9986). On the London Bullion Market, the price of gold fell to 963.86 dollars per ounce from 977.50 dollars late on Wednesday.