EUR/USD extends the rally to near 1.1800 ahead of Eurozone inflation, US ISM PMI data

• EUR/USD extends upside to around 1.1790 in Tuesday’s early European session. 

• The US is reportedly seeking narrower deals to secure deals before Trump’s tariff deadline. 

• German inflation eased to 2.0% in June, softer than expected. 

The EUR/USD pair trades in negative territory near 1.1790 during the early European session on Tuesday. The US Dollar (USD) weakens against the Euro (EUR) amid rising fiscal worries and uncertainty around trade deals. The preliminary reading of the Harmonized Index of Consumer Prices (HICP) for June from the Eurozone and the US ISM Manufacturing PMI will be the highlights later on Tuesday. 

The Financial Times reported on Tuesday that US officials are looking for narrower deals to avert the looming reimposition of US tariffs. Four people familiar with the talks said US President Donald Trump’s administration was seeking phased deals with the most engaged countries as they hurried to reach an agreement by the July 9 deadline. The uncertainty around trade agreements continued to weigh on sentiment and exert some selling pressure on the Greenback. 

Investors are concerned about the US Senate's attempts to pass Trump's tax cut and spending bill, which faces internal party disagreements over its predicted $3.3 trillion addition to the national debt. Fiscal worries have dampened optimism and contributed to the USD’s downside. This, in turn, acts as a tailwind for the major pair. 

Across the pond, preliminary data from the German statistics office Destatis showed on Monday that German inflation, as measured by the Harmonized Index of Consumer Prices (HICP) eased to 2.0% YoY in June from 2.1% in the previous reading. This figure came in softer than the expectation of 2.2%. 

On a monthly basis, the HICP rose by 0.1% in June versus  0.2% prior, below the market consensus of 0.3%. The softer-than-expected German inflation readings might cap the upside for the shared currency in the near term.