EUR/USD drifts higher above 1.0950 ahead of German Industrial Production

• EUR/USD trades firmer near 1.0985 in Tuesday's early European session. 
• ECB policymakers continue to set the stage for an easier policy stance.
• Traders push back bets on aggressive Fed rate cuts in the November meeting. 

The EUR/USD pair extends its recovery to around 1.0985 on Tuesday during the early European trading hours. The major pair edges higher amid the modest weakening in the US Dollar (USD). However, the upside for EUR/USD might be limited as traders expect a smaller interest rate cut from the US Federal Reserve (Fed) in November. 

French Central Bank Chief Francois Villeroy de Galhau said on Tuesday that the European Central Bank (ECB) would cut interest rates next week as economic growth is weak and this raises the risk that inflation will undershoot its 2% target. The comments support market pricing for another 150 bp of ECB rate cuts over the next twelve months.

ECB Isabel Schnabel is set to speak later on Tuesday, and Industrial Production in Germany will be released. The dovish remarks from ECB policymakers or any sign of weakness in Europe's largest economy could drag the Euro (EUR) lower against the Greenback. 

On the USD's front, the encouraging US jobs data on Friday raised the expectation that the Fed will cut 25 basis points (bps) at the central bank's November meeting. This, in turn, might lift the US Dollar (USD) broadly and might cap the upside for EUR/USD. The odds of a Fed rate cut of 25 bps stand at an 85% chance, up from 31.1% last week, according to the CME FedWatch Tool.