USD/CAD surges to near 1.3800 as US yields rise ahead of Fed Beige Book

• USD/CAD rises ahead of US JOLTS Job Openings and the Fed Beige Book due on Wednesday.
• The US Dollar gains demand as higher US yields attracts foreign capital.
• The Canadian Dollar comes under pressure on expectations of a potential Bank of Canada rate cut in September.

USD/CAD extends its gains for the third successive session, trading around 1.3800 during the European hours on Wednesday. The US JOLTS Job Openings and the US Federal Reserve (Fed) Beige Book will be eyed later in the North American session.

The USD/CAD pair appreciates as the US Dollar (USD) receives support amid rising yields on US Treasury bonds, with the 2-year at 3.66% and the 10-year at 4.29% standing at the time of writing. It is worth noting that rising Treasury yields make US assets more attractive to global investors, hence capital inflows increase demand for USD.

However, the upside of the Greenback could be restrained due to the prospect of the US Federal Reserve (Fed) rate cut this month, along with the dovish remarks from Fed officials. The CME FedWatch tool indicates pricing in more than 89% of a 25-basis-point (bps) rate cut by the Fed at the September policy meeting, up from an 86% chance a day ago.

Traders are also awaiting labor market data this week that could shape the US Federal Reserve's (Fed) policy decision in September. Key reports include ADP Employment Change, Average Hourly Earnings, and Nonfarm Payrolls for August.

The USD/CAD pair also draws support as the Canadian Dollar (CAD) faces challenges amid prospects of a Bank of Canada (BoC) interest rate cut in September. Traders are now pricing in nearly a 55% chance that the Canadian central bank will cut rates in its next decision, up from around a 40% chance last week, according to Reuters.