Yellen testimonies to continue soft dollar moves through week

• Fed Chair in front of Senate tomorrow and House on Weds

• UK CPI and jobs numbers to continue slowing price and wage moves

• Portuguese Central Bank appoints new BES Board

• Eurozone industrial production and CPI should keep single currency quiet

Central bank news and views still remain the most important metric in the analysis of the world's currency markets; however, the recent noises from the Portuguese banking sector have stirred an element of risk through the pot. We are not ones to believe that the situation in Portugal will last much longer though.

The timeline for Banco Espirito Santo has been quickened through the weekend following the Portuguese Central Bank's decision to appoint a new Board of Governors. The Prime Minister of Portugal also appeared on TV yesterday to assure taxpayers that BES would not be propped up by the state and that in no way would Portuguese deposit holders and junior bond holders be hit by a one off levy similar to the 'burden-sharing' that took place in Cyprus last year.

Asian markets have taken the news well but we'll have to wait for European markets and the PSI 20 to open for the real verdict on things. Both S&P and Moodys downgraded their credit rating of Banco Espirito Santo on Friday afternoon to 'highly speculative' grades.

Elsewhere the weekend was quiet from a policy standpoint but we do not expect this to remain the case through the week. Janet Yellen's semi annual testimonies in front of US politicians is the obvious highlight of the policy week although we believe that she will veer little from the most recent set of Federal Reserve minutes.

Within these the Federal Reserve struck a cautiously dovish tone; acknowledging the improvements in the US jobs market but using the low inflation environment and outlook as a counterweight to any near term hawkishness. The reiteration of the use of macro prudential tools as controls on potential bubble conditions instead of interest rates has also been seen as a dovish shift, although ably neutered by the confirmation of the imminent end of the Federal Reserve's QE3 asset purchases plan in October.

There is little to suggest that Chair Yellen will feel the need to alter this tone at this week's testimony and as such we see little reason why the USD should strengthen. She sits in front of the Senate Banking Committee tomorrow and the House Financial Services Committee on Wednesday.

Sterling's week really kicks off tomorrow with the latest inflation numbers. Whether we see the overall level of CPI run higher we deem to be less relevant than the movements within core prices. Summer months tend to see some level of food price volatility but we believe prices have remained relatively stagnant in the past month courtesy, mainly, of the strong pound.

If disappointment is anticipated in the inflation numbers then that will be likely made up by strong increases in the jobs market and we are looking for a slip in the unemployment rate to 6.5%. This will matter little for the outlook for wages however and we anticipate another drop in average earnings to emphasise the disparity between the two measures of how well the jobs market is really performing.

Today's Eurozone industrial production numbers are set to fall by 1.2% on the month according to consensus estimates. Figures from the Eurozone have been poor of late as the German economy has acted as a weight on the continental averages. While the European calendar is quiet this week, with only CPI on Thursday to really worry about, we are still happy to maintain short-term bearishness on the single currency, especially against the pound.

Have a great day.