FOREX-Sterling gains on Brexit report euro falls on Italian budget concerns

    * Bloomberg report boosts hopes of UK Brexit deal
    * U.S., Canada NAFTA deal boosts loonie
    * Italian budget fears weigh on euro 

 (Updates prices, market activity and comments to U.S. market
open, new byline, changes dateline, previous LONDON)
    By Karen Brettell
    NEW YORK, Oct 1 (Reuters) - The British pound rose against
the U.S. 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 U.S. 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 U.S. 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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    Currency bid prices at 10:57AM (1457 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1581        $1.1608     -0.23%         -3.46%      +1.1628     +1.1574
 Dollar/Yen       JPY=        113.9300       113.6800    +0.22%         +1.12%      +114.0600   +113.6700
 Euro/Yen         EURJPY=     131.97         131.91      +0.05%         -2.37%      +132.4600   +131.8200
 Dollar/Swiss     CHF=        0.9834         0.9819      +0.15%         +0.93%      +0.9855     +0.9802
 Sterling/Dollar  GBP=        1.3053         1.3028      +0.19%         -3.40%      +1.3110     +1.3013
 Dollar/Canadian  CAD=        1.2814         1.2904      -0.70%         +1.88%      +1.2900     +1.2787
 Australian/Doll  AUD=        0.7213         0.7228      -0.21%         -7.54%      +0.7232     +0.7207
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1389         1.1391      -0.02%         -2.57%      +1.1428     +1.1365
 Euro/Sterling    EURGBP=     0.8872         0.8908      -0.40%         -0.12%      +0.8916     +0.8864
 NZ Dollar/Dolar  NZD=        0.6611         0.6616      -0.08%         -6.70%      +0.6632     +0.6601
 Dollar/Norway    NOK=        8.1580         8.1448      +0.16%         -0.60%      +8.1690     +8.1251
 Euro/Norway      EURNOK=     9.4489         9.4527      -0.04%         -4.06%      +9.4622     +9.4396
 Dollar/Sweden    SEK=        8.9414         8.8872      +0.43%         +9.02%      +8.9501     +8.8837
 Euro/Sweden      EURSEK=     10.3570        10.3129     +0.43%         +5.26%      +10.3622    +10.3083
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