EUR/USD strengthens above 1.1550 despite French political crisis

• EUR/USD recovers to near 1.1575 in Friday’s Asian session.

• Lingering political uncertainty in France could weigh on the Euro. 

• Traders brace for a breakthrough on the ongoing US government shutdown.

The EUR/USD pair gains ground around 1.1575, snapping the four-day losing streak during the Asian trading hours on Friday. The potential upside for the major pair might be limited as the political turmoil in France weighed on the Euro (EUR). The preliminary reading of the U-Mich Consumer Sentiment report will be in the spotlight later on Friday.

French President Emmanuel Macron will name a new Prime Minister by Friday evening, per the Guardian. France’s longstanding political crisis deepened this week when the Prime Minister, Sébastien Lecornu, resigned after 27 days in office. "In France, turmoil following the resignation of Prime Minister Lecornu has undermined EUR sentiment," said Kieran Williams, head of Asia FX at InTouch Capital Markets.

Across the pond, the US government shutdown entered its tenth day on Friday as the Senate rejected funding bills from lawmakers that had the potential to bring the shutdown to an end. The shutdown has caused a delay in official US economic data, which complicates the Federal Reserve’s (Fed) decision-making on interest rates. Concerns over a prolonged US federal shutdown could undermine the Greenback and create a tailwind for the major pair. 

New York Fed President John Williams said on Thursday that he would be comfortable with cutting interest rates again. Meanwhile, San Francisco Fed President Mary Daly noted on Friday that inflation has come in much less than she had feared, adding that the US central bank is projecting additional cuts in risk management.

Money markets are currently pricing in a 95% probability of the central bank cutting its key interest rate again in the October policy meeting, according to the CME’s FedWatch tool.