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UPDATE 1-Sterling surges as Britain, EU ready Brexit transition deal

* Britain, EU agree transition deal text - EU diplomat

* Sterling hits best level vs euro since Feb. 8

* BoE meeting, UK data, mean busy week for pound

* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Adds details on transition agreement, updates prices)

LONDON, March 19 (Reuters) - Sterling surged on Monday as Britain and the European Union appeared to reach broad agreement on a post-Brexit transition period and the Irish border .

Sterling pushed to its best level against the euro since Feb. 8, rising as much as 0.6 percent to 87.55 pence per euro , as talk of a agreement filtered out of a meeting between Britain's Brexit minister, David Davis, and EU chief negotiator Michel Barnier on Monday.

Against the dollar, the British currency rose 0.6 percent to $1.4048, the first time sterling has breached the $1.40 mark since Feb 26.

"People are expecting something positive and they have been positioning ahead of it," said Viraj Patel, an analyst at ING. He said the pound could rise as high as $1.43 this week if economic data also support sterling and the Bank of England is more hawkish than expected.

Sterling faces a pivotal week, with the BoE announcing an interest rate decision on Thursday after crucial inflation and wages data.

Market analysts had mostly expected Britain to secure a transition agreement at Thursday's EU summit. That would mean little change in trading between the UK and the EU bloc for around two years after Britain leaves next year.

Questions about the transition have hung over sterling, not least because securing the terms would mean a shift in focus to what trading relationship the two sides would have after Britain leaves.

"There is a lot of optimism about the transition deal. The market thinks it's a done deal and the general expectation is that a deal is going to be contingent on the Irish border issue," said Alvin Tan, an FX strategist at Societe Generale.

Despite optimism over an agreement, a deadlock over Irish border arrangements had threatened to derail any agreement .

A senior EU diplomat said on Monday negotiators had agreed draft Brexit treaty texts, although some details remain outstanding.

Later this week the Bank of England monetary policy meeting is expected to keep rates on hold but prepare the market for a possible increase in May, an increase it has signalled is contingent on a transition agreement.

Analysts do not expect the BoE to serve up any surprises, but will be looking at both consumer inflation data, due on Tuesday, and wages data due on Wednesday for any sign of inflationary pressures building in the economy. (Reporting by Tommy Wilkes; editing by Larry King)