FOREX: FX OPTION EXPIRY

EGB spreads to Bunds are little changed vs. late Friday levels with oil marginally firmer over the same horizon and benchmark European equity index futures paring gains to print little changed over that window.

• On the issuance side, we look for gross issuance of EUR27.3bln this week, down from E31.2bln the week prior, with Belgium, Germany, Spain and France set to come to market.
• Meanwhile, desks note that flow support will be limited, with only modest German and Italian coupon payments eligible for reinvestment this week.

• The USD index has operated within a tight 25pip range on Monday. While coming under some initial pressure, Friday’s pullback lows of 101.05 remained untested, and most recent demand is seeing the index pare session declines. Short-term profit taking dynamics are worth monitoring ahead of month/quarter end, while overall, the bullish trend remains in place amid the post-Fed optimism for the greenback.
• For AUDUSD, very modest underperformance today keeps the total pull lower from the May highs at 5.3%. 0.6876 lows were printed on Friday as the pair edges closer to the March 30 lows at 0.6833. Key short-term resistance has been defined at 0.7088, the Jun 15 high.
• Notably, AUDNZD continues to be well supported in the 1.2180 region, with a cluster of daily lows forming here across the last week.
• Assistant Governor Christopher Kent revealed on Monday that the RBA has adopted a framework to guide the Board's use of additional policy tools when interest rates are near their effective lower bound, placing emphasis on its dual mandate while weighing their benefits and costs. Kent’s remarks come ahead of the RBA minutes tomorrow as the market assesses the potential for further rate hikes in Australia this year.

Reuters reports that US and Iranian technical teams are set to meet in Doha, Qatar, in the “coming days” to continue negotiations on the implementation of the US-Iran Memorandum of Understanding, according to a source with “knowledge of the talks”. Reuters notes, “mediators have set up communications channels to de-escalate any incidents and technical talks are set to continue.”

• The report comes after US officials told reporters on Sunday that the sides had agreed to 'stand down' and hold high-level talks in Qatar on Tuesday to resolve escalating tensions in the Strait of Hormuz.
• According to Axios, the venue was switched from Switzerland to Qatar to focus on resolving a series of ceasefire violations over the weekend, which included US attacks on Iranian missile defence/radar sites and Iranian counterattacks on US bases in Bahrain and Kuwait.
• Axios reports that, “Iranian state media quoted the IRGC as threatening more forceful attacks on ships in the Strait of Hormuz, raising the prospect of the peace process coming to a halt.”
• Meanwhile, Iran continues to engage with Oman on plans to bilaterally regulate traffic through the Strait of Hormuz, which is touted to include fees that would effectively act as a toll on shipping. The US is likely to view the talks as a contravention of the MOU, especially in light of US Secretary of State Marco Rubio securing a pledge from Oman that future arrangements for the strait would not involve transit fees.