NEW YORK: The British pound rose against the US dollar on Monday on a Bloomberg report that the UK government was proposing a compromise on the Irish border issue.
The report sparked optimism that Britain would be able forge a deal to leave the European Union.
The Canadian dollar, meanwhile, strengthened against the dollar after the United States and Canada reached a last-minute deal on Sunday to replace the North American Free Trade Agreement (NAFTA), keeping intact a three-country, $1.2 trillion open-trade zone that had been about to collapse after nearly a quarter century.
"It's headline driven trading still for many markets and it's probably going to remain the focus for traders in the short run," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
Sterling gained 0.19 percent on the day against the dollar to $1.3053.
The US dollar dropped 0.70 percent against the loonie to $1.2814.
The new United States-Mexico-Canada Agreement (USMCA), which avoids tariffs, will make it harder for global auto makers to build cars cheaply in Mexico and is aimed at bringing more jobs to the United States.
"The good news is that the risk of bad news has been removed. I don't think there's anything here that really changes the medium term outlook for the Canadian dollar or the Canadian economy. It's just removed an uncertainty," said Osborne.
The euro was last down 0.23 percent against the greenback at $1.1581, after it also earlier strengthened to $1.1622 on the Bloomberg report.
The US dollar has strengthened against the euro since Wednesday, when the Federal Reserve raised interest rates as expected and said that it foresees another rate hike in December, three more next year and one in 2020.
The euro has also been hurt by concerns that a significant increase in Italy's budget will exacerbate the country's already high debt levels.
Italian daily La Repubblica reported on Monday that the European Commission was set to reject Italy's plans to lift its budget deficit to 2.4 percent of gross domestic product in 2019 and open a procedure against its public accounts in February.
The proposed deficit is three times the previous administration's target.
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