Pound tumbles after Trump warns Theresa May's Brexit deal may hurt UK-US trade

President said Brexit agreement 'sounds like a great deal for the EU'

The pound dropped against the dollar and the euro after Donald Trump said Theresa May’s Brexit deal favoured the EU and would make trade between the UK and US more difficult.

The US President said the Brexit agreement “sounds like a great deal for the EU”, and warned that the terms of the deal would make a UK-US trade deal impossible.

“I think we have to take a look seriously whether or not the UK is allowed to trade. Because right now if you look at the deal, they may not be able to trade with us,” Mr Trump told reporters outside the White House on Monday.

“And that wouldn’t be a good thing. I don’t think they meant that.”

The US is Britain’s largest single export market – in 2016 trade with the country was worth nearly £100bn, according to the Office for National Statistics.

In response, a Downing Street spokesman said: “The political declaration we have agreed with the EU is very clear we will have an independent trade policy so that the UK can sign trade deals with countries around the world – including with the US.”

However, sterling was down 0.5 per cent against the dollar at $1.12767 on Tuesday and fell 0.33 per cent against the euro to hit €1.1275.

Connor Campbell at Spreadex said Mr Trump’s negative outlook on the Brexit deal “wasn’t what the extra-sensitive sterling wanted to hear”.

Earlier this week, experts warned that the pound is likely to remain prone to volatility in the run up to a parliamentary vote on the Brexit deal in December.

Hussein Sayed, chief market strategist at FXTM, said sterling traders “know very well that the real struggle is just about to begin”.

“There’s a lot of bad news that is currently priced in sterling, but more to come if the deal is voted down by parliament, so expect risk to remain skewed to the downside,” he added.