US Dollar Index extends the rally above 98.00 amid negative mood 

• The US Dollar Index trades in positive territory for the third consecutive day around 98.10 in Monday's early European session. 
• Trump's latest tariff threats boost the US Dollar against its rivals. 
• US June CPI inflation report will take center stage later on Tuesday. 

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, attracts some buyers to a near three-week high at 98.10 during the early European session on Monday. Renewed trade tensions triggered by US President Donald Trump weigh on risk sentiment, lifting the Greenback. 

Trump on Saturday threatened to impose a 30% tariff on imports from two of the largest US trading partners, the European Union (EU) and Mexico, beginning August 1. German Chancellor Friedrich Merz noted that he will work closely with French President Emmanuel Macron and von der Leyen over the coming weeks to resolve the escalating trade dispute with the US. Meanwhile, the escalating trade tensions between the US and EU might boost the safe-haven flows, supporting the DXY in the near term. 

Chicago Fed President Austan Goolsbee said over the weekend that fresh tariffs unveiled by Trump have further muddied the inflation outlook, making it more difficult for him to support the rate cuts that the President has pressed for. Traders reduce their bets on a US Federal Reserve (Fed) rate cut, pricing in just over 50 basis points (bps) worth of easing by December. The cautious stance of the US central bank might cap the upside for the DXY. 

Traders will take more cues from the US Consumer Price Index (CPI) inflation data for June, which is due later on Tuesday. This report might offer some hints about the future path for US interest rates. Economists expect US inflation to have picked up slightly last month. However, any signs of softer-than-expected inflation could push Fed rate reduction expectations, undermining the US Dollar in the near term.