By Dhara Ranasinghe and Naomi Rovnick

LONDON (Reuters) - Traders are increasingly confident the European Central Bank will pause its run of interest rate cuts now that the central bank sees itself as well-positioned to deal with global economic uncertainty fuelled by U.S. tariff policy.

Following Thursday's quarter-point cut in rates to 2%, ECB chief Christine Lagarde said the central bank was in a "good place" and was getting to the end of the monetary policy cycle.

That lit a fuse under markets: The euro rose to six-week highs against the dollar and rate-sensitive short-dated euro zone government bond yields jumped as investors trimmed their rate cut bets.

Money markets now price in a roughly 20% chance of a July cut compared with almost 30% just before Lagarde started speaking, with market attention initially falling on downward revisions to the ECB's latest inflation forecasts.

While traders still anticipate one more cut this year given U.S. tariff uncertainty, the bigger picture is that the ECB's most aggressive easing cycle since the 2008/2009 global financial crisis was nearing an end, analysts said.

"The phrase that turned markets was that the ECB is in a good place to navigate the uncertainties," said Aviva Investors senior economist Vasileios Gkionakis.

"Absent a major shock on tariffs or an external shock, the most likely outcome is that the ECB is done."

The euro rose more than 0.5% to $1.1481, while two-year German government bond yields rose 8 basis points to around 1.88% in their biggest one-day jump in more than three weeks.

"The strength of the euro is coming from the ECB's surprisingly hawkish message that they are approaching the end of the cutting cycle with today's rate cut," said Commerzbank currency strategist Michael Pfister.

Becky Qin, multi-asset portfolio manager at Fidelity International, said she took a positive view on the euro given expectations for European investors to bring money back home from the United States.

The euro's trade-weighted exchange rate is up almost 4% so far this year while oil prices are down 13%, putting downward pressure on inflation.

Data on Tuesday showed inflation slowed to 1.9% in May from 2.2% a month earlier.

TURNAROUND

A cut in the ECB's inflation projections initially caught market attention, but that was quickly overshadowed by Lagarde's comments.

"The language was tilted to a pause being the base case," said Gareth Hill, portfolio manager at Royal London Asset Management.

"The objective for this meeting was to get the market prepared for rates staying near where they are right now in case something left-field comes."