LONDON (AFX) - The euro was slightly higher against the dollar in early trade as the markets brushed aside last night's compromise deal over Germany's budget deficit warning, dealers said. The European Union's finance ministers are expected to rubber-stamp the deal later to allow Germany and Portugal to avoid a formal warning. The two countries have agreed to do their upmost to bring their budget deficits close to balance by 2004. Rob Hayward, currency strategist at ABN Amro, said the compromise is unlikely to damage the euro in the current environment. "I don't think it's wise to cut spending or raise taxes in this environment," he said. And Paul Mackel, currency strategist at Dresdner Kleinwort Wasserstein, agreed the impact of the deal on the currency markets is minimal. "The damage had already been done," he said. Trade data from Germany was also slightly encouraging for the euro. Germany's trade surplus in December rose to 8.1 bln eur from a surplus of 7.3 bln in November, and from a surplus of 1.7 bln eur in December 2000. Nigel Anderson, economist at Royal Bank of Scotland, said the acute weakness in imports in December is a reflection of the parlous state of demand in Germany, to the extent that it is indicative of aggressive inventory cutbacks in the period. However, he said it "gives a slightly more encouraging signal for production in the opening months of this year". Meanwhile, dollar/yen was rangebound as well, ahead of this weekend's meeting between President George W Bush and Japanese Prime Minister Junichiro Koizumi. ABN's Hayward said some market participants are expecting some "cosmetic measures" from Japan ahead of the Bush visit, which should be yen positive. But Mackel noted that Bush may indicate that he tolerates a weaker yen in exchange for structural reforms. Sterling was slightly firmer in early trade, in line with the euro, but encouraging retail sales data from the British Retail Consortium provided further evidence of underlying consumer buoyancy. And the Swiss franc enjoyed a slight rally against the dollar on renewed terrorist fears. The FBI last night warned that Yemeni national Fawaz Yahya al-Rabeei might be planning a terrorist attack on US targets in the coming days.