Investing.com - Sterling surged on Monday amid news that the UK plans to compromise on the Irish border issue to move forward with a Brexit deal.

GBP/USD jumped 028% to 1.3066 as of 9:05 AM ET (13:05 GMT), not far from an earlier high of 1.3078.

UK Prime Minister Theresa May plans to make a new Brexit deal with the European Union, Bloomberg reported. A senior British government official told Bloomberg that the country sees a way to reach an agreement on the border issue.

The deal would only apply as a last resort if a deal is not reached and would be conditional on the UK having full access to the EU customs union. The EU has already proposed allowing Northern Ireland to trade with Ireland without full checks, which May has rejected on the grounds that it would break up the UK.

Meanwhile the U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, inched down 0.05% to 94.75 as trade tensions eased and investors rallied to riskier assets.

The U.S. and Canada reached a trade deal on the North American Free Trade Agreement on Sunday night, just hours before the deadline.

The deal was renamed the United States-Mexico-Canada Agreement and will give the U.S. access to Canadian dairy market and will cap Canada's auto exports to the U.S.

The loonie was at a four-month high, with USD/CAD down 0.76% to a 1.2812.

Elsewhere the euro was lower as traders remained cautious after Italy's government announced a budget deficit that defied Brussels. The European Commission is expected to reject Italy’s budget plans .EUR/USD inched down 0.02% to 1.1602.