(Updates throughout, adds quotes)

By Joice Alves

LONDON, April 17 (Reuters) - Euro zone bond yields

paused for breath on Wednesday after this week's climb, trading

near a 1-1/2-month high, as traders assessed central banks'

possible next moves following robust U.S. data.

This week's fall in demand for safe assets pushed bond

yields higher, while surprisingly strong U.S. retail data on

Monday caused investors to further trim their bets on Federal

Reserve rate cuts this year, and by extension causing a slight

reduction in European Central Bank (ECB) rate cut pricing.

On Tuesday, top U.S. central bank officials, including

Federal Reserve Chair Jerome Powell, backed away from providing

guidance on when interest rates may be cut, saying that monetary

policy needed to be restrictive for longer.

On the same day, ECB President Christine Lagarde said the

bank would cut rates soon, barring any major surprises, and

argued the impact of geopolitical events on commodity prices had

not been very significant so far.

Germany's 10-year bond yield, the benchmark for

the euro zone, was last 0.4 basis point (bps) lower on the day

at 2.48%, not far from its highest level since late February hit

on Tuesday and recovering from Friday's tumble to 2.318%, when

investors snapped up safe assets as tensions between Israel and

Iran ratcheted higher.

Yields move inversely to prices.

The German 2-year bond yield, most sensitive to

expectations for policy rates, rose 1.3 bps to 2.94%, after

briefly rising to an almost one-week high.

Mohit Kumar, chief economist at Jefferies, said with the

U.S. economic data continuing to be strong and the market

questioning whether the Fed needs to cut at all this year,

central banks' rate decisions would be the main driver for

markets.

"Despite the geopolitical risks in the background, we think

that the rates market will likely drive all asset classes in the

near term," he said.

Analysts said investors will be watching for a slew of

central banks speakers due in the day, including Bank of England

Governor Andrew Bailey.

Italy's 10-year bond yield was last 0.2 bps

lower at 3.89%, after surging to its highest level since March 1

on Tuesday.

Data on Wednesday confirmed euro zone inflation slowed

across the board last month, reinforcing expectations for a ECB

interest rate cut in June, even as rising energy costs and a

weak euro currency cloud the outlook.