(Bloomberg) -- Traders further pared bets on interest-rate cuts from the European Central Bank and Bank of England following an unexpectedly strong US jobs report. 

Money markets priced fewer than 140 basis points of monetary-policy easing by the ECB and less than 120 basis points by the BOE in 2024, according to swaps tied to the central bank meeting dates. It’s the first time since mid-December that traders bet on fewer than six and five quarter-point cuts respectively.  

Investors have been reassessing their expectations for monetary easing from major central banks since late last week, adopting a more cautious tone as the new year started. In late December, the market priced in as much as 174 basis points of ECB rate cuts this year and 150 basis points from the BOE. 

“While I’m not particularly concerned about a significant selloff in the short-term in the longer end, the risks are in, my view, for the selloff to continue,” said Piet Haines Christiansen, director for ECB and fixed income research at Danske Bank. “I still like to fade the 2024 central bank pricing.”

The moves picked up after US non-farm payrolls surged more than expected and the unemployment rate hold steady. That led US traders to pare back bets on cuts from the Federal Reserve, with a cut as soon as March now seen as a coin toss. 

US Payrolls Pick Up, Wages Gain as Labor Market Stays Solid

Earlier on Friday, December’s inflation reading for the euro area sped up, primarily due to energy base effects. Consumer prices rose 2.9% from a year ago, up from 2.4% in November, while a measure of core prices omitting volatile elements fell for a fifth month, to 3.4%, Eurostat said Friday. Both figures matched the median estimates in a Bloomberg survey of economists.

The biggest leg of the repricing in central bank bets came on Thursday, after data showed S&P Global’s purchasing managers’ index was revised higher for Germany and the UK in December.

Bonds fell for a second consecutive day on Friday, with the German 10-year yield trading eight basis points higher to pass 2.20%, the highest since mid December. Its UK counterpart jumped 11 points to 3.84%. 

--With assistance from James Hirai and Alexander Weber.

(Updates moves post US jobs report.)

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