Pound surges after Donald Trump's trade chief accuses Germany of abusing euro for own gain

Donald Trump's trade chief accused Germany of using a "grossly undervalued" euro to "exploit" the US and the rest of the EU. Photo / AP

Sterling completed its best January against the US dollar in six years after Donald Trump and a key adviser renewed an attack on countries that "exploit" their weak currencies.

The value of the pound climbed as high as $1.2593 against the US dollar after the US president heavily criticised China and Japan for "play[ing] the money market".

His comments followed a meeting with pharmaceutical executives in which he pledged to bring back drug manufacturing to the US.

The rise in sterling's value on Tuesday rounded off its best January performance against the dollar since 2011 and its first positive start to the year in half a decade.

It came as Trump's trade chief put the US on a collision course with Germany after he accused Berlin of using a "grossly undervalued" euro to "exploit" the US and the rest of the EU.

Peter Navarro, who heads the US president's new National Trade Council, described the single currency as an "implicit Deutsche Mark" that gave Germany a competitive advantage over its trade partners.

The economics professor also said Germany was the main obstacle to a trade deal between the US and European bloc as he dismissed a revival of Transatlantic Trade and Investment Partnership (TTIP) talks.

"A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the US with an 'implicit Deutsche Mark' that is grossly undervalued," Navarro said.

"The German structural imbalance in trade with the rest of the EU and the US underscores the economic heterogeneity within the EU - ergo, this is a multilateral deal in bilateral dress."

Trump has highlighted a preference for "one-on-one" trade deals. He pulled the US out of the Trans-Pacific Partnership (TPP) with 11 Pacific Rim nations on his first full day in office.

Navarro told the Financial Times the UK's decision to leave the EU had "killed" a similar trade deal between the US and Europe.

Angela Merkel, German chancellor, said her country had no control over the euro. Photo / AP

Trump has signalled that the US will engage in trade talks with the UK. Angela Merkel, Germany's chancellor, said the country had no influence over the euro exchange rate.

"I neither want to nor can I do something to change the situation," she told reporters in Stockholm.

Mario Draghi, the ECB's president, has warned that the country's persistent current account surplus has contributed to imbalances and hindered growth in the eurozone.

Analysis by the Organisation for Economic Co-operation and Development (OECD) suggests the euro is trading below its "fair value".

Data published by the Paris-based think-tank shows the the euro is the most undervalued currency among the dollar's major peers.

European analysts dismissed Navarro's comments. "He hasn't understood the euro or this is a serious conspiracy accusation," said Henrik Enderlein, director at Jacques Delors Institut in Berlin.

"We take independence seriously over here."

Navarro also underscored Trump's pledge to "buy American and hire American" as he said policymakers would create an environment where manufacturing components would be made in a "robust domestic supply chain that will spur job and wage growth".

He told the FT: "It does the American economy no long-term good to only keep the big box factories where we are now assembling 'American' products that are composed primarily of foreign components."

Navarro has previously accused "cheating China" of destroying US factories by flooding the country with "contaminated, defective and cancerous" exports.

Navarro backed a Republican plan for a so-called "border adjustment tax", which would eliminate levies on export revenues but also stop companies from reducing their taxable income by deducting import costs.

While many economists have highlighted that this will push up consumer costs, Navarro described this as "an old and tired argument the globalist wing of the offshoring lobby has used for years to put Americans out of work and depress wages by shipping our jobs offshore".

"We prefer paychecks to welfare checks for the American people and a robust middle class with rising wages," he said.