USD/MXN rises above 20.50 as Trump vows 25% tariffs on Mexico

• USD/MXN climbs to near 20.50 in Tuesday's early European session, adding 1.1% on the day. 
• Trump's fresh tariff threats exert some selling pressure on the Mexican Peso. 
• The FOMC meeting minutes will take center stage later on Tuesday. 

The USD/MXN pair surges to around 20.50, the highest since early November, during the early European session on Tuesday. The Mexican Peso (MXN) weakens sharply after US President-elect Donald Trump vowed to enact 25% tariffs on all products from Mexico. 

Early Tuesday, Trump said that he would announce a 25% tariff on all products from Mexico and Canada from his first day in office and impose an extra 10% tariff on goods from China. The prospect of likely substantial tariffs has prompted traders to become more cautious about the currencies of the United States' (US) trading partners. This, in turn, drags the MXN lower against the Greenback as Mexico is the number one exporter to the US.

"Risk sentiment is getting crushed for now on Trump's tariff risks -- the dollar is being viewed as a haven and the affected nations' currencies like the Mexican peso are getting hammered," said Mingze Wu, currency trader at StoneX Financial.  

Investors will take more cues from the FOMC meeting minutes, which is due later on Tuesday. The cautious stance from the Federal Reserve (Fed) could contribute to the USD's upside, while the dovish tone from the Fed officials might weigh on the USD in the near term. On Wednesday, the US preliminary Gross Domestic Product (GDP) data for the third quarter (Q3) and Core Personal Consumption Expenditures (Core PCE) - Price Index for October will be in the spotlight.